Investment points lay out multi-phase flowmeter leaders throughout the industry chain. The company was founded in 1994 by Chairman Dou Jianwen and his colleagues from the Chinese Academy of Sciences. It is a leading provider of comprehensive solutions for multi-phase metering in oilfields. It occupies the vast majority of markets such as China, Oman and the United Arab Emirates, and its product sales rank among the top 3 in the world. After years of development, the company has now formed an equipment sector including flowmeters, hydraulic end assemblies, etc., to carry out service sectors for oil field environmental protection and drilling. At the same time, it has an oil and gas sector in North America, completing various industrial chain layouts. In August, the company took a stake in CNNC Jiahua to enter the nuclear power spent fuel aftermarket. In the first three quarters of 2016, the company achieved operating income of 208 million yuan, -24.4% year-on-year, and net profit of 2.09 million yuan, +150.9% year-on-year. The US block has benefited from the recovery in oil prices, and high performance flexibility can be expected. The company's US shale oil and gas sales come from two blocks: 1) Jointly developed the Niobrara block with Carrizo (10% equity), with a total area of 60,000 acres; 2) the Texas Permian block (100% interest), with a total area of about 7,000 acres, with a total ownership block area of 13,000 acres. The company's current equity scale is estimated to produce more than 200,000 barrels of oil per year. This month, the company announced a capital increase of 20 million US dollars to subsidiary Haimer US, which will increase investment in shale oil exploration and development. According to current oil price calculations, the company's US shale oil wellhead prices have been able to achieve a small profit, and the oil and gas sales business is expected to contribute high performance elasticity along with rising oil prices. The boom in the hydraulic end of fracturing equipment has rebounded, and multiple categories have formed a synergy in the equipment sector. Qinghe Machinery, which was acquired by the company in 2014, specializes in hydraulic end assemblies for fracturing equipment. Hydraulic fracturing pump components generally need to be replaced within 200 hours, and the consumables properties are obvious. Qinghe achieved profits of 444.0 million yuan and 55 million yuan in 2014 and 2015, with excess profit promises of 26% and 32% respectively. In April-September of this year, orders from major customer Halliburton were delayed or affected the completion of the 50.4 million yuan profit promise. However, the number of active drilling rigs in North America has rebounded 54% from the low point during the year, and Halliburton's production is expected to increase strongly. It is expected that Qinghe will resume growth in 2017. The company obtained Saudi Aramco supplier certification during the year. It is estimated that Saudi Aramco will purchase about 160 multiphase flowmeters per year. Based on the company's 10% share, the sales volume of multiphase flowmeters will increase 30% from the current average of 50 units per year. In addition, the company has invested 220 million yuan in 27.82% of Xi'an Sitan, the largest oilfield water injection equipment company in China, and is determined to raise 708 million yuan to increase its capital by 708 million yuan to increase oilfield environmental protection projects. The product layout of various types of equipment is expected to advance in tandem. Enter the vast post-nuclear power market. The company announced in August that it obtained 25% of CNNC Jiahua's shares with 35 million yuan. CNNC Jiahua has complete civil nuclear/military nuclear equipment manufacturing licenses and related confidential qualifications. It is geographically close to CNNC's spent fuel processing project in Gansu, and has a significant competitive advantage. The investment scale of the first phase of the spent fuel project in Gansu is estimated to be over 28 billion yuan, and the construction period is about 8 years. At that time, CNNC Jiahua's non-standard equipment orders are expected to reach an average annual scale of 1 billion yuan. Risk warning. Risk of falling international oil prices; order delays; construction of spent fuel projects slower than expected, etc. Profit forecasts and valuations. The company's layout in the oil and gas industry chain has blossomed in many places and collaborated. The profit elasticity of the oil and gas block in North America is high during the upward oil price cycle. Liquid-end equipment and multi-phase flowmeters are expected to regain growth as the industry recovers, and participation in Xi'an Sitan will also increase the company's performance. The company took a 25% stake in CNNC Jiahua to enter the nuclear power spent fuel processing aftermarket during the year, taking an important step in the exploration of the new energy sector. We predict that in 2016-2018, the company will achieve net profit of 0.33, 0.93, and 111 million yuan, corresponding to EPS of 0.10, 0.29, and 0.34 yuan. Referring to the current PB average of 3.3 times PB of comparable companies Jerry, Tongyuan Petroleum, Hewlett-Packard and Petrochemical Machinery, we gave the company a PB valuation of 3.3 times, corresponding to the target price of 15.53 yuan/share, covering the “buy” rating for the first time.