Yinjiang Co., Ltd. released its 2017 three-quarter report. In line with expectations, Yinjiang Co., Ltd. announced results for the 1st to 3rd quarter of 2017: operating income of 1,301 billion yuan, up 17.42% year on year; net profit attributable to parent company was 123 million yuan, down 48.13% year on year, corresponding to earnings of 0.19 yuan per share. Development trends New orders in various business lines continue to grow at an accelerated pace compared to the interim report. (1) Smart transportation added 344 million yuan in the third quarter, up 47% year on year; 760 million yuan in the 1st to 3rd quarter, up 43% year on year; (2) smart cities added 357 million yuan in the third quarter, up 83% year on year; (2) smart city added orders of 1,012 million yuan in the 1st to 3rd quarter, up 75% year on year; (3) smart healthcare added 66 million yuan in the third quarter, up 44% year on year, and 350 million yuan in the 1st to 3rd quarter, up 31% year on year. Expense rates continued the trend in the second quarter, and indicators such as accounts receivable declined sharply due to transfers from Asia Pacific Security Communications. (1) The company's management and sales expense ratio continued the trend of change in the second quarter. The management expense ratio fell to 7.84%, down 2.25pcts from the same period last year, the sales expense rate rose to 3.87%, and up 1.17pcts from the same period last year. The change in the fee rate reflects the company's strategy of controlling back-office expenses and increasing sales investment since this year; (2) The sales of Asia Pacific Security Communications reduced accounts receivable by 261 million yuan to 1,185 billion yuan from the interim report; (3) The company recorded imputed net profit of 123 million yuan in the first three quarters, higher than the equity incentive plan of 2017 The annual target is 120 million yuan. It is estimated that it is likely that this target will be achieved throughout the year. Projects such as Ali Urban Brain and Smart City PPP are progressing steadily. (1) Ali released Urban Brain 1.0 on October 11. The company will undertake traffic cerebellar tasks in Hangzhou's urban brain. The traffic cerebrum is mainly responsible for signal timing, which is the company's traditional business strength; (2) As of the end of this reporting period, the company has signed strategic cooperation agreements with 33 local governments and established strategic turnkey partnerships. Profit forecasts We have lowered our earnings per share forecasts for 2017 and 2018 by 12% and 8% from RMB 0.26 and $0.29 to RMB 0.23 and $0.27, respectively. Valuation and recommendations Currently, the PE of the company's stock price corresponding to 2017/2018e EPS is 58.2x/50.2x. We maintained a neutral rating, but lowered our target price by 12.1% to RMB 13.80, which is 1.85% higher than the current stock price. Risks (1) smart city implementation falls short of expectations; (2) systematic valuation correction.