Matters: The company released its report for the third quarter of 2016. In the first three quarters of 2016, the company achieved operating income of 87 million yuan, an increase of 42.9% over the same period of the previous year, and achieved net profit attributable to the parent company of 4.675 million yuan, and a decrease of 28.2% over the same period last year. In the third quarter of 2016, the company achieved operating income of 0.3 million yuan, an increase of 43.83% over the same period last year. Net profit attributable to the parent company was 7.17 million yuan, and the loss increased by 1139.35% over the same period last year. Target Price: - RMB Current Stock Price: 9.78RMB Investment Rating Recommended Rating Changes Maintaining Investment Points 1. Benefiting from new business development and subsidiary business growth, the company's overall performance improved this year, and the company's revenue increased markedly in the first three quarters, and the loss amount decreased by about 30%, mainly due to the company's new business development and subsidiary business growth. Among them, the parent company's transformed product, the coal mine intelligent safe transportation system sold 2 units, achieving revenue of 5.4814 million yuan, and the revenue of Pratt Bus set-top box products also increased significantly. The subsidiary Fuhua Yuqi won the bid for the 4G communication “one network, one stop” technology research and development and specialized service project for the Shendong Daliuta Mine of Shenhua Shendong Coal Group Co., Ltd., which had a great impact on the performance. 2. Supply-side reforms are beginning to bear fruit. The balance between supply and demand brings opportunities for main business recovery. China's coal supply-side reforms began to bear fruit this year. In the first nine months, coal enterprises above the national scale produced 2,456 million tons of raw coal production, a year-on-year decrease of 10.5%. The coal price increase was more than 50%. The imbalance between market supply and demand was eased, and the company's main coal-related business is expected to pick up. The company also increased market investment in coal-related products with high added value, such as monorail crane auxiliary transportation systems. 3. The company is actively promoting business transformation, focusing on rail transit and military industry in response to the severe coal industry situation. On the one hand, the company is transforming flexible demand products such as coal mine safety monitoring to rigid demand products such as intelligent mine transportation systems. Currently, new products have entered the market, and on the other hand, it is actively transforming rail transit and military businesses. The subsidiary Fuhua Yuqi has been developing rail transit wireless communication and railway big data integration services since 2014. First, it has achieved breakthroughs in railway system integration and big data business, and has already won a bid amount of 457.9 billion yuan. Second, the general railway train on-board communication market has gradually added new equipment starting with a single WIFI set-top box product, and the market continues to stabilize. Furthermore, the high-speed rail wireless communication business is undergoing product testing, and it is expected that there will be plenty of room for development. The company has basically completed the acquisition of Shikai Technology. The products of Shikai Technology are mainly used as optical targeting and tracking guidance systems for anti-tank missiles. They are essential and important national defense equipment, and the corresponding products can maintain their dominant position over a long period of time. Shikai's profit promises from 16 to 18 were 60 million yuan, 73 million yuan, and 86 million yuan respectively, which can significantly increase the company's profits. 4. The profit forecast predicts that the company will achieve net profit of 0.04 billion, 61 million, and 116 million yuan in 16-18, corresponding EPS of 0.01, 0.11, 0.22 yuan, and PE of 1422X, 86X, and 45X, maintaining the recommended rating. 5. Risks suggest that new business expansion falls short of expectations, and the coal industry continues to be sluggish.