1H17 results were in line with expectations, Sichuan Changhong announced 1H17 results: operating income of 34.76 billion yuan, up 6.1% year on year; net profit attributable to parent company was 155 million yuan, down 66.6% year on year, corresponding to earnings of 0.03 yuan per share. Development trends and cost pressure have led to a sharp decline in profits year over year: 1) The company is a second-tier leader in the white power field, and its ability to raise prices is not comparable to that of first-tier leaders, and it is impossible to effectively transfer cost pressure when the cost of raw materials for white electricity rises rapidly. 2) The price of color TV panels is rising rapidly, and competition is fierce. Internet companies are facing capital problems, but traditional companies such as Sharp and Philips vigorously promoted in the first half of the year, and the market competition pattern could not be improved. 3) The impact of the settlement time of commercial projects led to a year-on-year decrease of 202 million yuan in real estate business profits; 4) Changes in the Indian market environment led to a decrease in the scale of set-top box shipments. 5) Gross margin fell 1.2pct to 13.7% year on year, and the company's expenses were stable during the period, so the decline in gross margin directly led to a decline in net profit margin of 1pct to 0.4% year on year. Furthermore, the appreciation of the renminbi led to exchange losses of 139 million yuan, a significant increase over the same period last year. Operating conditions of holding subsidiaries: 1) Meiling Electric's 1H17 revenue was 8.5 billion yuan, +24% year-on-year, and net profit was 92 million yuan, -16.3%; 2) Huayi reduced 1H17 revenue by 4.37 billion yuan, +24.3% year-on-year, and net profit of 126 million yuan, up 0.06% year on year. High operating pressure: 1) The company lost a huge loss of 1.98 billion yuan in 2015 and fell into a business crisis. 2) In 2016, considering that the assessed value of assets increased by 244 million dollars, the company was basically close to the break-even point. 3) 1H17 lost 58.7 million yuan after non-deductions, relying on the transfer of subsidiaries to reverse losses. The profit forecast maintains the profit forecast. The 2017/2018 EPS was 0.09 yuan/0.10 yuan, respectively. Valuation and recommendations Currently, the company's stock price corresponds to 41.7x 2017e P/E. We maintain a neutral rating and target price of RMB 4.00, which is 8.11% higher than the current stock price. Demand in risk markets fluctuates, and raw material prices rise.