Order confirmation fell short of expectations. The performance of the first three quarters of 2016 declined. The company achieved revenue of 235 million yuan, YoY -32.75%, in the first three quarters of 2015; net profit of 25.42 million yuan, YoY -61.11%; and earnings per share of 0.09 yuan and YoY -61.11%; and earnings per share of 0.09 yuan and YoY -64%. Among them, Q3 achieved revenue of 87.06 million yuan, YoY -22.51% in a single quarter; net profit of 10.11 million yuan, YoY -1.86%; the downward trend slowed down. The reason for the sharp decline in performance is that some of the larger contracts accepted by the company have a long settlement period, and revenue has not yet been reflected. In addition, the company's new products, low temperature economizers, new air preheater projects, chimney flue systems, and new curtain wall products — self-cleaning enamel panels — are all in the promotion period, due to the fact that they have not yet reached scale. The scale effect is yet to be seen. Profitability declined. The gross profit margin for the first three quarters of 2016 was 33.14%, down 6.9pct year on year, and the net profit margin was 10.96%, down 7.55 pct year on year. We judge that the decline in gross margin is mainly due to the decline in the profitability of industrial protective enamel materials. Low-temperature economizers are in the promotion period, and no scale effect has yet been shown. The fee rate for the period was 23.96%, up 8.23pct from the previous year. Both the management fee rate and the sales expense ratio grew faster due to the decline on the revenue side. Net operating cash during the reporting period was 35.37 million yuan, YoY +310.84%. This is mainly due to an increase in the return of goods and a decrease in the payment of taxes and fees. In-hand orders are full. 2017 is the year that the standards were met, and the low-temperature economizer business is about to explode. Although the company confirmed revenue in the first three quarters was lower than expected, in-hand orders were relatively full. From January to September 2016, it was disclosed that the amount of major contracts was about 220 million yuan, while other smaller orders were not announced. We judge that the company will continue to have a good momentum of signing orders in the fourth quarter, and the number of on-going orders is expected to increase further. Next year will be the last year for the eastern region to complete ultra-low emissions, and it is expected that orders for technical improvements to low-temperature economizers will be released on a large scale. In addition, the company acquired 51% of the shares of Wuxi Jinkor Power Equipment Co., Ltd. in August 2016. The company has a Class A boiler manufacturing license, mature manufacturing capacity, process control experience, and a sound quality control system for low temperature economizers and MGGH complete equipment. Policy inversion, increase in production capacity, and release of production capacity, all of these factors will help the company's low-temperature economizer business explode in 2017. Production capacity is about to be released, and the building decoration and curtain wall business is expected to achieve breakthroughs in fund-raising projects — the main projects of the “New Functional Enamel Material Industrialization Base Construction Project” and the “Enterprise Technology Research and Development Center Construction Project” have been completed, decoration is underway, and the production line has already begun trial production. It is expected that mass production will be achieved by the end of this year or the beginning of next year. As a high-grade exterior wall decoration material, enamel building curtain walls have been used well abroad. Domestic applications are expected to achieve major breakthroughs in the short term, and the market space is rapidly expanding. To this end, the company has set up a special marketing team. With the release of production capacity, medium- to long-term growth can be expected. Firmly optimistic about the company's performance prospects next year and maintain the “buy” rating, we predict the company's 2016-18 EPS of 0.52/0.77/0.99 yuan, YoY +129%/47%/29%, and CAGR 63%. Taking into account the industry valuation and the growth rate of the company's performance, the company can be given 45-50 times PE in 16 years, with a reasonable valuation range of 23.4-26.0 yuan to maintain a “buy” rating. Risk warning: Order revenue confirmation progress fell short of expectations; enamel-plate chimney flue anticorrosion systems and building façade promotion fell short of expectations.