Event: the company released its annual report, with revenue of 320 million yuan in 2016, an increase of 5.9% over the same period last year, and a net profit of 72.27 million yuan belonging to shareholders of listed companies, an increase of 10.8% over the same period last year, in line with expectations. Achieve a gross profit margin of 37.84%, an increase of 2.95% over the same period last year, and a net profit rate of 22.58%, an increase of 0.99% over the same period last year, EPS0.21 yuan.

Steady growth in performance and continuous improvement in profitability the company's main products are needle roller bearings, clutches and pulleys, with revenues of 201 million yuan, 68 million yuan and 44 million yuan respectively in 2016, with year-on-year changes of + 9.38%,-6.06% and + 5.22% respectively. During the period, the company achieved a gross profit margin of 37.84%, an increase of 2.95 percentage points over the same period last year, resulting in profit growth higher than revenue growth. During the period, the expense rate was 15.46%, an increase of 2.23 percentage points over the same period last year, of which the sales expense rate, management expense rate and financial expense rate changed by-0.26%, + 0.57% and + 1.91%, respectively. During the reporting period, the company worked with international well-known parts manufacturers Valeo, Bosch, Magna, Japan

This Denso and well-known domestic motorcycle manufacturers Dajiang River, Wuyang Honda and New Dazhou Honda have maintained a stable cooperative relationship, and the individual pulley assembly has entered the global procurement system of international first-class parts manufacturers. lay the foundation for the stable growth of the follow-up company's performance.

With the steady progress of business transformation, the company participated in Wuxi Yilong Aviation equipment Co., Ltd. and Wuxi Jinrun Electro-hydraulic Control system Co., Ltd. During the reporting period. Among them, Wuxi pterosaur is the only domestic manufacturer with aircraft tire remanufacturing qualification and supply, and has supplied goods to Air China Limited, China Eastern Airlines Corp Ltd, China Southern Airlines Company, Hainan Airlines, etc., and is expected to share 10 billion yuan in the domestic aircraft tire remanufacturing market. At the same time, according to the company's annual report, the company will speed up the technical transformation work around the product requirements, consolidate its leading position in the field of needle roller bearings, and externally expand the sources of projects around the field of auto parts and accelerate the pace of mergers and acquisitions of high-quality projects. We believe that the company is expected to make its business stronger and bigger through endogenous extension.

Given a buy rating, the 6-month target price of 18.5 yuan is stable for the company's main business, and the transformation is expected to be strong. From 2017 to 2019, the EPS is expected to be 0.23,0.27 and 0.31 yuan, with a buy rating of 18.50 yuan.

Risk hint: automobile production and sales have fallen sharply; the transformation is not as expected.