Incidents. On October 29, Zhongtong Bus announced its three-quarter report. Sales revenue for January-September was 5.83 billion yuan, up 48.65% year on year, and net profit to mother was 455 million yuan, up 1.41 times year on year, with earnings per share of 0.77 yuan, up 92.5% year on year. The sales expenses rate and management fee ratio for the third quarter all declined to a certain extent, and the net interest rate level rose to 7.8%. Our comments on this are as follows: Opinions on fraud inspection and processing are about to be issued, and Zhongtong has benefited significantly. The company's accounts receivable of 6.7 billion dollars in the first three quarters were mostly government subsidies arrears, which had a significant impact on the company's cash flow, which in turn affected the marketing policy for the third quarter. Opinions on the inspection and handling of NEV fraud have been issued. The impact on Zhongtong Bus is extremely limited. It is expected that Zhongtong will be able to successfully obtain overdue subsidies in November. At the same time, the company's short-term loans for the third quarter increased sharply to 2,387 billion yuan due to the quarterly increase of 991 million yuan, and cash flow has greatly improved, and sales are expected to increase to a certain extent year-on-year and month-on-month. Sales have entered a period of rapid growth. According to the company's official website, in the first three quarters of '16, Zhongtong sold nearly 9,000 new energy buses, accounting for about 70% of the company's total sales. The entire industry accounted for nearly 20%, ranking second. Among them, sales of 8-meter pure electric buses have reached more than 6,000 units, further taking the title of “sales champion” in the industry. Since entering October, three batches of Zhongtong 8-meter pure electric buses have been successfully delivered to users, namely 150 orders from Yantai, Shandong, 120 from Laiwu, Shandong, and 300 units from the Shanxi market. In addition, orders for 256 units from Tai'an, Shandong will soon be completed, and it is expected that they can also be delivered to users in October. In total, the orders for Zhongtong 8-meter pure electric buses delivered to users in October have exceeded 1,000 units, and sales have entered a period of rapid growth. The electronic logistics promotion catalogue will soon be launched, significantly boosting performance. In the future, with the implementation of the subsidy policy and promotion catalogue, the risk of order fulfillment will be eliminated, and the rush market will be ushered in. We maintain Zhongtong's expectations of selling more than 13,000 new energy buses throughout the year, and profits are expected to increase dramatically. Currently, 11 electric logistics vehicles from Zhongtong have entered the “Road Motor Vehicle Manufacturer and Product Notice” and the “New Energy Vehicle Models Exempt from Vehicle Purchase Tax” catalogue. The fourth batch of electric logistics promotion catalogues is likely to be launched in September. It is estimated that Zhongtong Logistics will sell more than 5,000 vehicles and achieve a 1-2 times increase next year, leading to a performance growth rate of more than 30%. The valuation of new energy vehicles has yet to be reassessed. At the same time, looking at the future, the vehicle barrier is the highest in the NEV industry chain. For every vehicle sold, the terminal obtains the most profit and is the most sustainable. As far as valuation is concerned, the current vehicle valuation is the lowest. We believe that vehicle valuations will be revalued, which is very valuable for investment. On August 19, Gree Battery announced the acquisition of Yinlong New Energy for 13 billion yuan. The performance valuation in line with the 2016 promised performance has reached 18 times PE, and the primary market valuation has increased significantly. Zhuhai Yinlong sold 1,000 new energy buses in the first half of the year, with a valuation of 13 billion dollars. Zhongtong Bus had nearly 5,400 pure electric and nearly 1,000 plug-in new energy buses in the first half of the year. The secondary market had a market value of 10.7 billion dollars on October 31, which is significantly underestimated. Profit prediction and rating. Centralized delivery of logistics vehicles in the second half has led to rapid growth in performance. Looking forward to the future, while subsidies are being reduced, lithium battery prices are falling, and automakers will benefit the most. Zhongtong Bus is the purest standard for new energy vehicles in China, and its performance flexibility is huge. The company's 2016-2018 EPS is expected to be 1.19 yuan, 1.53 yuan, and 1.86 yuan, respectively, and PE corresponding to the latest closing price on October 31 will be 15.15 times, 11.80 times, and 9.67 times, respectively; the 2016 PE valuation will be given 30 times, and the target price will be maintained at 35.70 yuan, maintaining a “buy” rating. Uncertainties. New energy vehicle policies have been adjusted, and logistics vehicle sales have fallen short of expectations.