The company released an interim report. In the first half of 2016, it achieved operating income of 2.22 billion yuan, an increase of 28.8% over the previous year; net profit attributable to shareholders of listed companies was 200 million yuan, a year-on-year decrease of 15.4%; and earnings per share were 0.27 yuan, which is basically in line with our expectations. Revenue growth in the first half of the year was mainly due to the combined performance of Jilin Huayi and others. The decline in profits was mainly due to losses caused by the participating company Shenzhen Wuzhoulong due to NEV policies and other factors. New energy is an inevitable development direction for automobiles. The company plans to acquire 35% of Jiangsu Kawei's shares. Previously, it had acquired 48% of Shenzhen Wuzhoulong's shares, subscribed for 35% of Changchun New Energy's shares, and the controlling shareholder Zhonghuan invested to acquire 75% of the shares in electric vehicles in Stuttgart, Germany. The NEV industry layout is perfect and the development prospects are bright. Electric logistics vehicles are expected to enter the promotion catalogue in the second half of the year, and sales are expected to explode. Both Wuzhou Dragon and Jiangsu Kawei have a variety of electric logistics models, which are expected to receive a large number of orders, driving the company's rapid growth in performance. We expect the company's earnings per share in 2016-2018 to be 1.06 yuan, 1.11 yuan, and 1.27 yuan, respectively, giving the company 20 times the 2017 price-earnings ratio, a reasonable target price of 21.60 yuan, and maintaining the purchase rating. Key points supporting the rating The business trend is improving, and there is no worry about rapid growth throughout the year. Electric logistics vehicles failed to enter the promotion catalogue in the first half of the year, and the company's performance was affected to a certain extent. With the gradual clarification of the NEV policy, the company's performance is also expected to gradually be realized. It is expected to achieve significant growth in the 3rd quarter, and there is no worry about rapid growth throughout the year. New energy vehicles have a comprehensive layout, and the development prospects are promising. New energy is the future development direction of automobiles. The company plans to acquire 35% of Jiangsu Kawei's shares. Previously, it had acquired 48% of Shenzhen Wuzhoulong's shares, subscribed for 35% of Changchun New Energy's shares, and the controlling shareholder Zhonghuan invested to acquire 75% of the shares in electric vehicles in Stuttgart, Germany. The NEV industry layout is perfect, and the development prospects are promising. Electric logistics vehicles are expected to enter the promotion catalogue, and Wuzhou Dragon and Jiangsu Kawei will fully benefit. In the first half of the year, electronic logistics vehicles failed to enter the promotion catalogue due to industrial policy adjustments and other reasons, leading to a slump in terminal sales. Electric logistics vehicles are expected to enter the promotion catalogue in the second half of the year, and sales are expected to explode. Both Wuzhoulong and Jiangsu Kawei, in which the company is a shareholder, have a variety of electric logistics models, which are expected to receive a large number of orders and drive rapid growth in the company's performance. The main risks faced by the rating 1) The development of business such as interior and exterior parts fell short of expectations; 2) The development of the NEV business fell short of expectations. Valuation We expect the company's earnings per share in 2016-2018 to be 1.06 yuan, 1.11 yuan, and 1.27 yuan, respectively, giving the company 20 times the 2017 price-earnings ratio and a reasonable target price of 21.60 yuan, maintaining the purchase rating.