Main points of investment

In the first three quarters of 2016, the company's performance improved significantly compared with the same period last year, and the financial information disclosed in the company's semi-annual report showed that the company's main business hydropower business exceeded expectations during the first half of the year. This also explains the excellent development of the company in terms of operating income and return net profit from the beginning of the year to the end of this reporting period. However, the company's third-quarter operating income and return net profit showed a downward trend. The company's third-quarter operating income was 65.2598 million yuan, down 15.57% from the same period last year; the company's third-quarter net profit was 41.9864 million yuan, down 10.15% from the same period last year. The reason for the sharp decline in the company's operating income and return net profit in the third quarter is that the company's main business, hydropower business, received a policy impact in the third quarter. During the reporting period of the third quarter, the company was issued by the Hunan Provincial Development and Reform Commission. The notice requires that the grid electricity price of hydropower projects in Hunan Province be lowered from September 1, 2016. As a result, the operating income of the company's three holding subsidiaries was also affected.

During the reporting period, although the company's operating income showed a downward trend in the third quarter, on the whole, the company's main business hydropower business was still strong, while the company deeply implemented and implemented the business development strategy of "focusing on hydropower and health care for the aged, supplemented by equity investment business". While consolidating and continuously developing the hydropower basic business, we will make every effort to promote the development of the health pension industry. The company's rehabilitation medical chain projects in the province have landed one after another, the market expansion outside the province has made a breakthrough, and the combination of medicine, health and care has been promoted in depth. During the reporting period, the company and Hubei Qiaoya Endowment Industry Co., Ltd. jointly invested in the establishment of Hunan Development Qiaoya Endowment Industry Co., Ltd., the establishment of the holding subsidiary further enhanced the company's competitiveness in the field of healthy pension.

Profit forecast and investment advice; during the reporting period, the company's operating income and homing profit both declined due to policy shocks, but the company's operating income and homing profit in the first three quarters increased significantly compared with the same period, indicating that the company's main business is still strong. At the same time, the company was more actively involved in the field of healthy pension during the reporting period, further implementing the company's business development strategy of "focusing on hydropower and health care for the aged, supplemented by equity investment business". We are optimistic about the development potential of the company's provincial business and the combination of middle and high-end medical care projects. It is estimated that the company's EPS from 2016 to 2018 will be 0.30 EPS 0.34 RMB 0.38 yuan respectively, and the current share price will be rated as "overweight" corresponding to PE in 47-42-37.

Risk hint: pension projects are not as good as expected.