Recent developments in the company Dinghan Technology announced the fourth draft equity incentive plan, granting 15.17 million stock options to 300 people, including directors, executives and core business personnel. Of these, 13.655 million shares were granted for the first time, and 1,515 million shares were reserved. The initial grant and part of the reserved exercise period are executed in three installments. For 12/24/36 months after the grant date, the unlock ratio is 30%/40%/30%, respectively. Comment on the broad coverage of equity incentives to enhance management and employee motivation: The company plans to grant 15.17 million stock options to 300 people, including directors, executives and core business personnel. Of these, 13.655 million shares will be granted for the first time, and 1,515,000 shares will be reserved, accounting for 2.12% and 0.27% of the current total share capital, respectively. The incentive targets account for 20.6% of the company's current total number of employees, excluding independent directors, supervisors, and shareholders or spouses holding 5% or more of the shares, covering a wide range of incentives. The exercise price is high, which shows the company's confidence in the future. The exercise price of the first stock option granted is 12.34 yuan/share, an 18.2% premium over the current share price. The introduction of an equity incentive plan when the exercise price is higher than the current price shows, on the one hand, the company's management's confidence in future performance growth, and on the other hand, takes into account the motivation and enthusiasm of the incentive target. It is agreed that net profit from the mother will grow steadily over the next 3 years, and the company's performance can be expected. The conditions for the three instalments of stock options granted for the first time were net profit of not less than 200 million yuan in 2018, an increase of > 20% in 2019 compared to 2018, and an increase of > 40% in 2020 compared to 2018, respectively. Considering that the railway industry has a certain cyclical nature and is greatly affected by policies, we believe that it is moderately difficult to complete these enforcement conditions and also helps to motivate employees. Equity dilution has little effect, and implementation costs are relatively low. This time, the total equity incentive plan grants 15.17 million shares, accounting for 2.44% of the current total share capital, and the degree of equity dilution is low; the company expects to grant the first portion at a total cost of 28.376 million yuan, and an amortization cost of 12.584 million yuan in 2018, which is 11.2% of the company's profit in 2016, and will decrease in subsequent years. The valuation proposal takes into account the low railway completion mileage in 2017, the decline in EMU procurement, and the company's profitability lower than expected. We lowered the company's 2017/18 profit forecast by 42% and 10% to 0.15 yuan and 0.48 yuan, respectively. Under the current stock price, the company's 2017/18 P/E is 72.2x/22.5x, respectively, and the valuation is reasonable. We lowered the company's target price by 14% to 14.26 yuan, corresponding to the 30x 2018e target P/E, and maintained the recommendation. The risk sector's recovery fell short of expectations.