The results for the first half of 2016 were in line with expectations, and the revenue of railway construction equipment for the first half of 2016 was 1.7 billion yuan and net profit was 215 million yuan, down 7.5% and 4.9%, respectively. The performance was generally in line with expectations. Equipment sales declined; gross margin increased 1.6 percentage points year over year. Due to delays in delivery of new products, revenue from railway road maintenance machinery fell 13.8% to 1.1 billion yuan, while parts/overhaul services/railway maintenance increased by 7.0%/7.7%/8.7%, respectively. The gross margin for machinery sales/components/railway maintenance increased 2.7/5.2/19.1 percentage points year-on-year respectively, while the gross margin for overhaul services decreased 15.7 percentage points. Overall, the consolidated gross margin increased 1.6 percentage points year over year. The sales management expense ratio has increased, and other earnings have increased. In the first half of 2016, the sales management expense ratio increased 1.6 percentage points over the same period last year due to increased R&D expenses and amortization. Other earnings increased 132% year over year due to increased interest income and government subsidies. The company's net profit margin increased 0.4 percentage points year over year. Trends Operations may accelerate in the second half of 2016. Results for the first half of 2016 declined slightly due to road maintenance machinery tenders and delays in delivery of some products. However, considering the company's current orders of 2.4 billion yuan (end of 2015) and new orders signed in 2016, which may exceed 3.5 billion yuan, we believe the company is expected to meet its full-year target. The profit forecast maintains the 2016/17 profit expectations of 0.34 yuan and 0.39 yuan, corresponding year-on-year increases of 14.9% and 14.4%. The current stock price of the valuation and recommendation company is 9.6 times and 8.5 times the price-earnings ratio for 2016 and 2017, which is significantly lower than that of comparable companies. Maintain the target price of HK$5.56, corresponding to 12 times the target price-earnings ratio for 2017. Reiterate the recommendation. At risk, new orders and deliveries in the second half of the year fell short of expectations.