Key Investment Highlights The company announced its 2016 annual performance forecast. It is expected that net profit attributable to shareholders of listed companies will increase by 0 to 10% in 2016 compared with the same period last year, with a profit of 42.9094 million yuan to 47.203 million yuan. Reason for the increase in performance: The company's main business increased by about 2.5% compared to the same period last year. The company's performance grew steadily in 2016, and the company's net profit growth rate is expected to achieve a greater breakthrough in 2017. The company specializes in R&D, production and sales of ventilation system equipment and ventilation systems such as fans, mufflers, and air valves. The company continues to maintain its leading edge in the domestic market in the subways and tunnels sector, and its market share has steadily ranked first. We expect that from 2017 to 2020, the company will fully benefit from the rapid development of the subway during the 13th Five-Year Plan period, and the company's net profit margin is expected to achieve a greater breakthrough in 2017. It is expected that in 2017, the company will successfully complete the acquisition of Hongxiang Technology and Zhongqiang Technology to achieve military and civilian integration. In mid-October 2016, the company announced that it plans to acquire 100% of the shares of Hongxiang Technology and Zhongqiang Technology at a consideration price of 1.16 billion yuan and 1.05 billion yuan respectively, and that it plans to raise 1,016.6 billion yuan in supporting capital. The company's five former shareholders had a total share of 90% of the supporting capital; of these, Zhou Jiancan, the controlling shareholder and actual controller of the company, subscribed 616.6 million yuan, accounting for 60%; fully demonstrating confidence in the company's long-term development. We expect the company to successfully complete the acquisition in 2017. The three major technical product advantages - ventilation technology, infrared thermal imagers, camouflage paint, and camouflage barriers will help achieve better civil-military integration. Valuation and Rating: We estimate that the company's net profit from 2016 to 2018 will be RMB 45 million, RMB 68 million, RMB 95 million, and EPS will be RMB 0.28, RMB 0.42, and RMB 0.59, respectively. Considering that the company is one of the leading enterprises in the field of subways, tunnels and nuclear power fans and ventilation systems in China, its performance is growing steadily year by year. In particular, in 2017, it is expected that the company will achieve a two-way breakthrough in industrial integration and performance growth, maintaining a “gain” rating. Risk warning: The merger and acquisition process fell short of expectations; the growth rate of subway construction was lower than expected.