It is predicted that the company's profit in 2016 will fall 20.8% year on year. Electronics City announced the 2016 performance report. It is expected to achieve annual revenue of 1.52 billion yuan, a year-on-year decrease of 12.9%, and is expected to achieve net profit of 4.1 billion yuan, a year-on-year decrease of 20.8%, lower than expected. Key points of interest The low settlement volume for the second half of 2016 dragged down full-year results. The company expects to achieve revenue of 1.52 billion yuan in 2016, a year-on-year decrease of 12.9%, of which the second half of the year is expected to achieve revenue of 1.15 billion yuan, a year-on-year decrease of 27.2%, mainly due to few projects completed during the period and low settlement volume. The company's operating profit margin in 2016 was 36.2%, down 3.5 percentage points from 2015, mainly due to impairment of accounts receivable and increased management expenses during the period. Due to the double impact of declining revenue and profit margins, the company expects to achieve net profit of 4.1 billion yuan in 2016, a year-on-year decrease of 20.8%. Projects outside Beijing are being deployed at an accelerated pace. The company signed a letter of intent for cooperation with the Jimei district government in Xiamen in September last year. In December, it already won a 103,000 square meter industrial park plot in Jimei District (about 560,000 square meters, 400,000 square meters above ground, 160,000 square meters underground). The land cost is only 194 million yuan, and the average floor price is only 485 yuan/square meter. It is intended to become an innovative development platform centered on the three major industries of mobile connectivity, creative innovation, and software information. The implementation of the Jimei project is another expansion of the company's projects outside Beijing after Tianjin Xiqing Industrial Park. We believe that the company's layout outside of Beijing officially entered a period of acceleration in 16/17, and that the Beijing-outside project will be a major highlight in the future. Valuation and recommendations According to the company's latest settlement situation, we lowered the company's 2016/17 profit forecast by 30%/8% to 0.51/0.86 yuan per share accordingly, and introduced the 2018 profit forecast of 1.09 yuan per share. The company's current stock price corresponds to a price-earnings ratio of 15.1/11.9 times in 2017/18, a 31% discount compared to NAV. We continue to maintain the company's “recommended” rating and target price of 14.0 yuan. Risk Macroeconomic downside risk.