Investment points 1. Performance turned losses into profits. The performance in the third quarter was impressive. The company had three main businesses: automation, oil and gas services, and smart industries. In the third quarter, the company achieved revenue of 188 million yuan and net profit of 19.58 million yuan, up 46.34% and 27.31% year-on-year respectively, rapidly reversing the loss trend in the first half of the year, mainly due to the steady increase in automation business revenue, and the implementation of new projects such as smart cities (building automation), oil and gas field chemicals, and oil and gas field environmental protection. The company's overall competitiveness continued to grow, and the company's overall competitiveness was effectively improved. Over the past three years, the company's net operating cash flow has continued to be negative. 2013-2015 was -2012 million yuan, -34.55 million yuan, and -1.6 million yuan, respectively. The net operating cash flow for the first three quarters of 2016 was -94.89 million yuan, mainly due to the company's rapid business development stage and complicated payment procedures for the company's main customers, a long accounts receivable collection cycle, and a certain amount of pressure on capital. Currently, the company is actively using the resource advantages of listed companies to actively expand financing channels and guarantee the capital required for the company's development. The three-fee rate for the first three quarters was 36.62%, which is basically the same as the same period in the past two years, but is significantly higher than the annual report data, mainly due to the company's industry business model, which accounted for a relatively large share of confirmed revenue in the fourth quarter. 2. Actively promoting the strategic layout. In recent years, the company has actively implemented capital operations. Through mergers and acquisitions, it has expanded the scope of oil and gas service business. Through the acquisition of high-quality companies such as Qingniao Electronics, Qiushi Jiahe, and Zhengzhou Xinsheng, it has made continuous breakthroughs in the fields of smart cities, smart grain storage, etc., and has formed a balanced development pattern of the three main industries of automation, oil and gas services, and smart industries, and new profit growth points are constantly emerging. Currently, the three main businesses are developing well, and their performance is constantly improving. Considering that the company has completed the holding acquisition of Sanda New Technology, we believe that the company's performance in the fourth quarter will continue to grow at a high rate, driving positive performance throughout the year. 3. The reduction in capital expenditure in the oil and gas industry affects the company. The limited automation business contributes more than 40% to the company's revenue. More than half of the automation business comes from oil and gas fields, while the oil and gas service business comes entirely from oil and gas fields. Currently, oil prices are still fluctuating at a low level, and capital expenditure in the domestic oil and gas industry has been reduced, but the revenue of security control technology in the petroleum industry is still very small. Compared to the overall capital expenditure of two barrels of oil, there is still considerable room for growth. Taking into account the company's various strengths and actively promoting business layout and capacity improvement, a breakthrough in the oil and gas service business is practical. Furthermore, oil and gas will remain the main energy supply for quite some time to come, and oil prices are expected to rise in the next year, which is beneficial to the company's long-term development. 4. Profit forecast: The company is expected to achieve net profit of 138 million, 232 million, and 313 million yuan in 16-18. EPS corresponding to increased dilution is 0.24 yuan, 0.40 yuan, and 0.54 yuan, and corresponding PE is 44X, 26X, and 19X, maintaining the recommended ratings. 5. Risk warning: New business development fell short of expectations, and goodwill was impaired.