Key investment points The company achieved operating income of 1129.8026 million yuan in the first half of 2017, an increase of 84.69% over the previous year; net profit of the mother was 101.7438 million yuan, an increase of 1.59% over the previous year, in line with expectations. The company's main performance comes from the modified plastics sector, which achieved revenue of 825.1913 million yuan, a year-on-year increase of 49.72%, and a gross profit of 159.4036 million yuan, a year-on-year increase of 62.98%. Xingke Electronics promoted diversified customer development, and revenue increased significantly in the second quarter. Xingke Electronics completed the business registration change procedure on January 11, 2017, became a wholly-owned subsidiary of Jubilee Technology, and included its March results in the company's consolidated report. The company has full-process production technology achieved by very few enterprises in the field of CNC precision metal structural parts in China, and has mastered industry-leading capabilities. Affected by LeTV's tight capital chain, Xingke Electronics' performance for the fourth quarter of '16 and the first quarter of '17 declined year-on-year, but there was a significant increase in revenue in the second quarter. From January to June 2017, revenue from LeTV was only 210,300 yuan. Xingke Electronics actively adjusted its strategy, and customers grew diversified, and there was no situation where major customers depended. Currently, according to information, Xingke supplies the latest hammer phone, and also provides CNC processing services for mobile phone terminal brands such as Brand A, OPPO, Meitu, and Xiaomi. Orders from a popular TV brand are also being picked up one after another, and future performance is expected to continue to improve. The accounts receivable debt of 3247.5 million yuan with LeTV was settled using a “debt-for-equity” method. On August 21, Xinko signed a “Debt Restructuring Agreement” with Lucky and Wu Meng LeTV Mobile. The latter used 6.1275% of Easy Go and 6.1275% of Dongfang Che Yun's shares to pay consideration of 322.9 million yuan and 1.85 million yuan respectively. Among them, Easy Go and Oriental Car Cloud are collectively known as “Easy to Use Vehicles” (VIE structure). At this point, the negative impact of the LeTV incident on Xingke's performance and potential problems have basically been eliminated. The performance of the company's modified plastics continues to grow and is in a leading position in the industry. According to the 2017 semi-annual report, the company's modified plastics business increased significantly compared to the previous year, with an increase of 49.72%. On the one hand, it is because the large-scale benefits of enterprise projects are prominent. In the context of supply-side reforms, the company is invincible in the industry with its excellent professional standards; on the other hand, it is due to the company's refined management, optimized cost and technical advantages, and increased research and development of high-margin products, which ensures the steady development of the enterprise. The company continues to expand its market share for products in other application areas. Jubilee Optoelectronics, a subsidiary of the company's LED modified plastics business, entered the new three-board innovation tier in June last year, and achieved net profit of 6.136,700 yuan in the first half of 2017, an increase of 49.79% over the previous year. At the same time, the company is actively laying out the 3D printer business. The large kettle production line has been officially put into operation. Currently, applications in the entire industry have not yet begun to be scaled up. Under the premise of meeting the production capacity requirements brought about by future scale expansion, it is foreseeable that when the next round of 3D printer business begins to increase, the company will usher in a new wave of performance growth. Risk factors: 1. Competition in the modified plastics and metal CNC industries is intensifying; 2. Modified plastics and metal CNC are unable to carry out continuous technological innovation; 3. As a result of 5G technology in mobile phones, metal cases are being replaced by other new materials due to electrostatic shielding effects. Profit forecasting, valuation and investment ratings: Xingke Electronics began to be consolidated in March this year. Considering LeTV's “black swan” incident, Xingke's profit contribution to the company was lower than earlier market expectations; however, at present, Xinko has reversed losses in the second quarter. The realizable profit forecast for the third and fourth quarters is the same or even better than the second quarter. It can return to normal order acceptance and profit in 2018, and the growth rate is conservatively estimated to be over 50%. Furthermore, the parent company's traditional business is driven by downstream demand, and sales volume is better than previous years. Based on the above considerations, we lowered the company's net profit forecast to 1.62/2.51/316 million yuan (original forecast of 701/853 million yuan in 17/18), corresponding to EPS 0.32/0.50/0.63 yuan (after dilution of the non-public share capital in February 2017, the original forecast was 1.4/1.7 yuan in 17/18). According to the valuation level of comparable companies, the company was given 30 times PE in 18 years, and the target price was lowered to 15.02 yuan to maintain the “buy” rating.