Report summary:

Company announcement: During the reporting period, the company achieved operating income of 216.076 million yuan, an increase of 4.93% over the same period of the previous year, the total operating cost was 188.1883 million yuan, an increase of 10.40% over the same period last year, and realized net profit attributable to shareholders of listed companies of 249.68,500 yuan, a decrease of 35.68% over the same period last year. During the reporting period, the company's main business was basically the same as the same period last year, but net profit declined sharply compared to the same period last year. The main reason was that tax refunds received by the company during the reporting period were drastically reduced compared to the same period last year, and financial expenses and sales expenses increased sharply compared to the same period last year.

Operating income rose slightly, costs increased too much, and net profit declined sharply year over year. In the company's main business, revenue from monitoring and measurement system products increased 33.76% year on year, which was the main business affecting a slight increase in operating income. At the same time, security products and rail traffic signal smart power systems experienced varying degrees of decline, down 44.75% and 64.58% year-on-year respectively. Since the revenue share of security products and rail traffic signal intelligent power systems was relatively low, the revenue from the main business was 216.076 million yuan during the same period, an increase of 4.94% over the previous year. The main reason for the sharp decline in net profit was that tax refunds for the reporting period were drastically reduced compared to the same period last year, and expenses increased during the same period.

Management expenses have declined, sales expenses and financial expenses have risen, and period expenses have increased year over year. One of the main reasons for the sharp decline in the company's net profit during the reporting period was rising expenses. The company's sales expenses were 139.8826 million yuan, an increase of 10.61% over the same period last year; management expenses were 41.1973 million yuan, a decrease of 5.42% over the same period last year; and financial expenses were 7.3206 million yuan, an increase of 291.49% over the same period last year. The main reason for the sharp increase in financial expenses compared to the same period last year was the decrease in interest income raised on capital raised during the reporting period compared to the same period last year.

Profit forecasts and investment suggestions: The company's short-term performance has declined, and short-term pressure is under pressure. In the medium to long term, first, investment in the rail transit industry will remain high in the future, and the industry will improve; second, the company is actively involved in major transportation WiFi while clarifying the business structure. We expect the company's 2017-2019 EPS to be 0.26/0.29/0.33 yuan, giving it a “buy” rating.

Risk warning: The company's market expansion did not meet expectations; railway fixed asset investment fell short of expectations.