Core view: The company released its 2016 annual report, achieving operating income of 564 million yuan, a year-on-year increase of 38.06%, net profit to mother of 112 million yuan, a year-on-year increase of 32.85%, and net profit after deduction of 58.44% year-on-year. The computer flat machine business picked up, and profitability and indicators rebounded markedly in the first half of 2016. The company's computer flat knitting machine business picked up markedly. Computer knitting machines increased 34.76% year on year, shoe top machines increased 139.43% year on year, and the knitting machinery business sector achieved revenue of 513 million yuan, an increase of 42.46% year on year. Affected by the recovery in the main business, the company's deducted non-net profit rebounded sharply. At the same time, net operating cash flow increased 920.06% year on year, and EPS increased 27.27% year on year. In the past two years, the company drastically reduced the sales scale of the buyer's credit model and stopped this business model this year. The company drastically reduced the calculation of asset impairment losses, and operating profit increased significantly compared to the same period last year. Comprehensive layout of the intelligent equipment business: From industrial robots to service robot companies have successively laid out the fields of robot system integration, machine vision, and core components in the intelligent equipment business field, forming a comprehensive layout of intelligent business, and the company's intelligent business continues to break through and expand. In 2016, the company made another breakthrough in business, entering the field of service robots using the intelligence+IP model, and released two service robot products aimed at the child education market. By channeling pearls, it integrates upstream high-quality hardware+midstream artificial intelligence+downstream sales channels with industrial resources integration. It has a positive impact on the company's future business development and related product sales and profitability. Investment advice: We expect the company's revenue in 2016-2018 to be $1,049 million, $1,302 billion, and $1,529 billion, respectively, with corresponding EPS of 0.20, 0.28, and 0.29, respectively. Based on the recovery of the company's main business this year, the volume of robotics business, and the good layout of intelligent businesses such as service robots, we will continue to maintain a “buy” rating after considering combining contributions and asset impairment losses to normal in the future. Risk warning: Computer horizontal machine business demand is declining; the intelligent equipment business falls short of expectations.