Shipbuilding Technology is the first listed company to do addition and transformation, forming three major business layouts. The company is a domestic first-class professional civil shipbuilding marine science and technology enterprise, the first A-share listed company in shipbuilding technology category. The company acquired Woking Natural Gas and Gold Shipping in 2014 and 2016 respectively, and entered the natural gas and sea and air equipment military products market, forming the current three major business patterns of shipbuilding and marine engineering, clean energy and defense equipment. The company's performance has increased steadily in the past three years, of which the company achieved operating income of 1.606 billion yuan (YOY34.16%) in 2016 and a net profit of 144 million yuan (YOY159.92%) attributable to the parent company. The substantial increase in performance compared with the same period last year is mainly due to the significant increase in revenue from gold shipping and natural gas.

The traditional business of marine engineering is upgraded to high-end products, and the external EPC platform is expected to be included as the main body in the future.

The company has been ploughing the field of ship and marine engineering for many years, has strong strength, has the ability of virtual digital design, and constructs a relatively complete collaborative design information platform to realize electronization, informationization and automation. At present, the global shipbuilding and marine industry is in a recession. Relying on ship design and ship engineering general contracting capacity, the company is actively upgrading and transforming to high value-added products such as green energy-saving ships and high-end special ships, so as to create new business growth space. It is estimated that the market space of high-tech marine industry in China from 2020 to 2025 is about 6-100 billion US dollars, and the market development space is broad. In addition, the company's EPC business platform and production base Dajin heavy Industry are still outside the body, and are expected to be incorporated into the main body of the company at the right time in the future.

The construction of the whole natural gas industry chain, the continuous layout of civil-military integration, and the good development of extension. In terms of clean energy, based on Woking natural gas business license qualification and gas source protection, and relying on the key technologies of LNG power ship system, the company carries out waterborne natural gas filling business and strives to build the whole industry chain of marine natural gas application. At the same time, set up a joint venture with CNOOC to give full play to the advantages of both sides and ensure the sustained and healthy development of the business. In terms of defense equipment, after the acquisition of Golden Shipping, the company has created the first demonstration military-civilian integration industrial park in China, forming a large-scale equipment industry that designs, manufactures and serves the defense needs of the whole army. In addition, a defense equipment research institute and a proposed military industry fund will be set up to further increase the integration of the army and the people.

The leader of the private military auxiliary ship is expected to be born, and is optimistic to achieve a 0-1 breakthrough. With the construction and development of China's Deep Blue Navy, we estimate that the market scale of the navy's main battle ships will be nearly one trillion in the next 30 years. Although the military auxiliary ships do not fight directly, as an important multiplier of naval combat effectiveness, the corresponding market space is also considerable. At present, relying on the strong strength of ship design and manufacturing and the qualification advantage of Jin Shipping military products manufacturing, the company explores and enters the military auxiliary ship market in order to obtain sustained and high value-added orders, and is optimistic that the military auxiliary ship business will achieve a breakthrough from 0 to 1.

Wuhan Shipbuilding Machinery, an important member of the Strategic Cooperation Group, will establish a joint venture company with China Shipbuilding heavy Industry 702 and 704 Research Institute, which is expected to share the dividend of mixed reform. In 2013, the company participated in a joint venture to establish Shanghai Hengtuo ship (the latter's largest shareholder is 704 integrated industrialization platforms); in 2015, it established a joint venture with 702 companies to establish China Shipbuilding heavy Industry (Shanghai) Energy Saving (the joint venture company was established by the Group to promote the industrialization of ship energy conservation and emission reduction); in 2017, Wuhan Shipbuilding, an important member of the Strategic Cooperation Group. On the one hand, Mr. Liu Nan, the actual controller of the company, comes from the background of the south ship, on the other hand, the company actively participates in the cooperation related to the north ship. With the deepening of the mixed reform of the north-south ship, the company is expected to achieve complementary resources and mechanism advantages with the shipbuilding "national team" and share the reform dividend.

Profit forecast and investment advice. It is estimated that the EPS in 2017-19 will be 0.56,0.73,0.92 yuan respectively. Combined with the average PE of comparable companies in 2017 and the valuation premium of military business, the company will be given 60 times PE in 2017, corresponding to the target price of 33.60 yuan, with a "buy" rating.

Risk hint. (1) uncertainty of the progress of military auxiliary ships; (2) changes in the natural gas business market; (3) the expansion of high value-added ships is not smooth.