Key takeaways
　　We had a conference call with CFO of Harmony yesterday. keytakeaways are as follows:
　　Main brands thriving escorting a robust balance sheet.
　　The three main brands （Harmony-BMW, Lexus, and Maserati） allenjoyed 2-digit growth in 2016. Particularly, Harmony raisedprice mark-up for most models of Lexus and reduced discountrate for BMW, which caused a higher GPM in Harmony's new carsales. There is sufficient fund and controlled CAPEX of Harmony,leading to a robust balance sheet.
　　Better rebate policy and strong product cycle of BWMhighlighting a brighter 2017. BWM increased its dealershipsell-in price discount and decreased the retail rebate, which willfurther stabilize BMW's dealership price, and enhance the GPM ofBMW dealers and improve their cash flow. Besides, new models,such as new 5 series and localized X3, consist a strong productcycle of BMW. With BMW contributing 75% revenue, Harmonyhas high earnings elasticity.
　　After-sales services maintained high growth;comprehensive biz network successfully built up. With arapid development in insurance and other agency businesses,Harmony's 4S after-sales services maintained high growth. Itscomprehensive after-sales biz has built up integrated network inlast two years, and is expected to boost in 2017——18.
　　EV programs restructured, FMC running smoothly. Lastmonth, Harmony announced a restructure in FMC, and Aichemight be their next target for structure optimization. As for FMC'sfirst EV model, R&D is running smoothly per schedule, and it willbe displayed in 2018.
　　Recommendation
　　We maintain BUY rating for Harmony, and TP at HK$4.2,based on 9x 2017e P/E.
　　Risks
　　Gross profit margin of new car sales lower than expected.