Key investment points: 5-fold increase in performance, most resilient. The company sold a total of 7,908 buses in the first half of the year, including 5,400 pure electric vehicles and more than 1,000 plug-in vehicles, with a market share of about 16%, a year-on-year increase of nearly 2 times. New energy vehicles accounted for more than 80% of sales, contributed more than 90% to profits, and was the most flexible market. At the same time, benefiting from a sharp increase in the net profit of bicycles compared to traditional cars, the company's revenue for the first half of the year was 3.96 billion yuan, up 95.2% year on year, and net profit to mother was 292 million, an increase of 5 times over the previous year. Opinions on fraud verification and handling will soon be issued, and Zhongtong has benefited significantly. The company's accounts receivable of nearly 6 billion dollars in the first half of the year were mostly government subsidies arrears, which had a significant impact on the company's cash flow, which in turn affected the June-July marketing policy. It is expected that opinions on the inspection and handling of NEV fraud will be issued in August. At that time, Zhongtong will be able to successfully obtain overdue subsidies. Cash flow will be greatly improved, and sales are expected to increase to a certain extent year-on-year and month-on-month. The electronic logistics promotion catalogue will soon be launched, significantly boosting performance. On July 11, Yao Jie, Deputy Secretary General of the China Association of Automobile Manufacturers, said at the regular monthly press conference on the operation of the automobile industry on the 11th that the forecast of 700,000 vehicles in 2016 has not changed, which indicates that the second half of the year will increase several times. In the future, with the implementation of the subsidy policy and promotion catalogue, the risk of order fulfillment will be eliminated, and there will be a rush market. Zhongtong is expected to sell more than 13,000 new energy buses throughout the year, and profits are expected to greatly exceed market expectations. 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 implementation of carbon emission regulations is beneficial to long-term development. It is expected that the “automobile carbon emission” rules led by the NDRC will be implemented by the end of 2016 and will be implemented on a trial basis next year. According to California's promotion and accounting method, bicycle credits are determined based on its battery capacity and range. For example, Nissan Leaf sells 3 points for each vehicle, Tesla 60 kwh is 5 points, and 85 kwh is 7 points. In 2015, Tesla sold more than 50,000 vehicles, and the total profit of credit transactions was 168 million US dollars. Zhongtong electric buses are equipped with batteries of about 120 kwh. Theoretically, the maximum amount of credit can be converted, and performance will improve significantly. 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 response to the 2016 promise 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 12.4 billion dollars on August 18, 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 August 18 will be 17.57 times, 13.67 times, and 11.21 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 policy adjustments, logistics vehicle sales fell short of expectations.