Investment highlights: Event: On the evening of October 25, 2016, the company released its 2016 three-quarter report. From January to September 2016, the company achieved operating income of 1,044 million yuan (YOY 29.47%) and net profit of 119 million yuan (281.71%). In the third quarter of 2016, the company achieved operating income of 199 million yuan (YOY -43.02%) and net profit of 17.4068 million yuan (YOY 66.85%). The traditional shipbuilding business market is still sluggish, and the company is making great strides in transformation and showing results. There has been no fundamental change in the current situation where the international shipping market continues to be sluggish, nor has there been a fundamental change in the situation of overcapacity in shipping capacity and shipbuilding production capacity. As of the end of the reporting period, the company has successfully acquired three companies, including Woking Utilization, Jet Energy Transportation, and Gold Shipping, through capital management, and all of them are currently running well. The increase in the performance of the company's main business came from the sales of gold shipping defense equipment related products and Woking Natural Gas. Among them, Woking promised that the audited net profit achieved in 2014, 2015 and 2016 was not less than 20 million yuan, 26 million yuan, and 33.8 million yuan; the actual controller of Kim Shipping promised that the total net profit of the 2015-2017 annuity shipping would not be less than 287 million yuan. It strongly forms the company's performance support. The military and civilian integration science and technology industrial park is the company's long-term plan, and the prospects are promising. The company and the Taizhou Pharmaceutical High-tech Industrial Park Management Committee signed a “Framework Agreement on Admission” on June 28, 2016, to invest in the establishment of the first exemplary civil-military integrated science and technology industrial park in China within the pharmaceutical industrial park. Using the existing qualifications, market and technical advantages of the military industry of Tianhai Defense and its holding subsidiaries, we design, manufacture, and service various equipment covering the defense needs of the entire military to form a large-scale industry. This move gives full play to their respective resource advantages, responds positively to the national defense development strategy of the integrated military and civilian population, and integrates military and civilian resources to serve the country's national defense construction. If successfully implemented, Tianhai Defense will enter a new voyage in the military industry, with great prospects for development. The synergy effect is obvious, and it is expected to enter the field of military auxiliary ships. Seizing the historical opportunity of large-scale investment by the Navy, the company obtained complete military product production qualifications after the acquisition of Jin Haiyun, and entered the field of military auxiliary ship manufacturing against the backdrop of declining prosperity in the civilian ship market, opening up broad space for the company's future development. After the acquisition is completed, Otsu Heavy Industries, which is outside the company's body, is expected to be the company's production platform. Tianhai Defense will provide the design of military auxiliary ships, and Kim Shipping will provide military quality, complementing and complementing each other with remarkable synergistic effects. Therefore, we are optimistic about the future development of the company. Profit forecasts and investment advice. The 2016-18 EPS is estimated to be 0.61, 0.87, and 1.30 yuan respectively. Considering the valuation premiums brought about by the transformation of military business and the growth space of subsequent civil-military integrated industrial parks, combined with the valuations of comparable companies, the company was given 70X PE in 2016, maintaining the target price of 42.70 yuan and maintaining the “buy” rating. Risk warning: the uncertainty of military orders; the civil shipping sector continues to be sluggish; corporate transformation falls short of expectations.