The 2016 results were in line with expectations, and the main profit came from asset disposal. On February 28, the company released its annual report, with 2016 revenue falling 60.42% year on year; net profit of 76.19 million yuan, up 64.10% year on year; net profit attributable to owners of the parent company after deducting non-recurring profit and loss - 102.51 million yuan, a decrease of 1125.4% from the same period last year. The company's main source of profit is investment income from the sale and transfer of shares in some real estate projects, of which the disposal of 100% shares of Shenzhen Wanze Real Estate and Shenzhen Bixuan made a total profit of 190 million yuan. Furthermore, benefiting from the recovery of real estate in Suzhou and Wuxi, the Taihu Manor Phase I project achieved sales revenue of 158.19 million yuan, while preparing to start the second phase of development and construction work in due course. The transformation is progressing rapidly, and new leaders in superalloys are on the rise. First, the new main high temperature alloy business has achieved revenue of 7.099 million yuan and gross margin is as high as 57.10%. It has achieved stable batch production capacity for ultra-pure high-temperature master alloys, established a single-crystal unrestricted precision casting production system and quality assurance system for advanced engines with independent intellectual property rights, and has reached or is close to a world-class level in key technical indicators such as blade yield and sulfur content; second, it has reached cooperation intentions with a domestic aero engine maintenance company and other customers, and has formed a good cooperative relationship with industry institutions; third, the four major manufacturing research and development bases are ready to go, including in Shenzhen and Changsha R&D and engineering centers have been established. At the same time, Shenzhen-Shantou Wanze Precision Foundry purchased 49,996 square meters of land in the Shenzhen-Shantou Special Cooperation Zone and obtained the “Construction Land Planning Permit” and EIA approval. Furthermore, Shanghai Precision Foundry has completed the site selection work in Shanghai and purchased 60,355.5 square meters of land; fourth, a large number of government subsidies prove that the company's technical team and products have been highly recognized within the system to support further growth. The company has strong endogenous and epitaxial energy. From an industrial perspective, the launch of the “Two Engine Project” and the establishment of the National Aero Engine Group all indicate that the localization of “two engine” superalloys has been elevated to a national strategy, and policy support will be greatly strengthened in the future, with huge development space and extremely high barriers. From a corporate perspective, since 2014, they have actively divested the real estate business and firmly transformed into high-temperature alloys, with remarkable core advantages. First, the international top superalloy team has a perfect incentive mechanism. The company has many top experts in the field of aero engines in the world, all of whom have been engaged in R&D and industrialization in the overseas superalloy industry for a long time. It is a very small number of technical teams that can quickly reduce the advanced level gap between China and Europe and the US. At the same time, as a private enterprise, the company has a perfect incentive mechanism, which can fully stimulate entrepreneurial motivation. Second, the positioning of superalloy products is clearly focused, and the development strategy is clear. The company focuses on the production of superalloy master alloys and precision casting blades and the maintenance of existing stock blades, targets domestic and foreign markets, and actively develops and grows through endogenous and epitaxial methods. Third, the recognition of the government and industry is extremely high, the performance is extremely growing, and the external power is strong. Relying on the Zhongnan Research Institute, the company has fixed and increased production capacity for parent alloys, precision casting blades and superalloy powders, opening up room for performance growth and strong epitaxial integration capabilities. Investment advice: “buy-A” investment rating, target price of 24 yuan for 6 months. We expect the company's 2017-2019 EPS to be $0.16, $0.38, and $0.62. Considering the huge space for superalloys in China, the company has a first-class technical team, focused positioning, solid layout, reliable products, high policy approval, and fixed increase projects in line with the national policy direction, we gave the company a “buy-A” rating, with a target market value of 15 billion yuan. Considering the factors of fixed increase and dilution, the target price is 24 yuan, which is equivalent to the 40x dynamic price-earnings ratio in 2018. Risk warning: 1) fixed growth projects fall short of expectations; 2) core talent loss; 3) relevant policies fall short of expectations