Company opinion The company released its performance report for the third quarter of 2016. On the evening of October 27, Rainbow Co., Ltd. released its performance report for the third quarter of 2016. The company's total operating income for the first three quarters was 241 million yuan, an increase of 3.71% over the previous year, and achieved net profit attributable to the parent company of 92.2 million yuan, up 59.99% from the same period last year. After a painful period, performance is expected to reverse the earlier company's main business with color imaging tubes. Since then, in order to adapt to market development, the company has achieved business transformation, focusing on LCD substrate glass. However, the path of transformation has not been smooth sailing. Dragged down by the divestment of the original business, construction of new business production lines, and investment in R&D, the company once experienced a sharp decline in revenue and loss during the painful period of transformation. However, at present, the company's business transformation is gradually becoming successful. Production lines such as G8.5 and G6 are gradually releasing production capacity, and the day when the company's profits are reversed will not be far off. High-generation production line layout is progressing steadily, leading technology, and continuous expansion of production capacity. The company is optimistic about the development of the LCD panel market and has carried out two aspects of layout: 1. Selling production lines such as CX01 and CX03 to improve asset operation efficiency; 2. Promoting the construction of high-generation LCD glass substrate production lines. While G6 continues to release production capacity and bring profit to the company, the company is actively laying out G8.5 production lines and 8.6th generation TFT-LCD projects. Currently, the G8.5 production line has been put into trial production, and the company is the first in China and the fifth in the world to master overflow technology It is one of the few companies that specialize in LCD substrate glass, and its technology is in a leading position among domestic peers. The high-generation production line broke the monopoly, and the company's net profit changed from negative to positive, with serious overcapacity for small to medium size panels. Transmission to the upstream caused a marked decline in the price of low-generation glass substrates. Rainbow shares bore the brunt of this, and the main business suffered a certain loss due to the G5 production line. However, the company has a flexible layout, sells and shuts down some low-generation production lines, and invests on a large scale on high-generation production lines. The high-generation production line has the characteristics of high gross profit margin, high market demand, and high industry concentration. The company's layout of the G8.5 production line is expected to break the monopoly and will gradually be recognized by the market, and it is only a matter of time before it becomes profitable. We predict that the 2016-2018 EPS will be -0.201, -0.086, and 0.038 yuan respectively, and the corresponding PE will be -50.35X, -118.48X, and 267.74X. Although the company did not enter the “increase in holdings” rating, the company did not give us an “increase in holdings” rating.