This report is read as follows:

The main business of commutator leader is sound, and the continuous expansion of new products and the integration of industry chain are expected to open up the growth space.

Main points of investment:

Maintain the overweight rating. The company released three quarterly reports, with revenue of 1.013 billion yuan from January to September 2017, an increase of 28% over the same period last year, and net profit of 114 million yuan, an increase of 29% over the same period last year, in line with our expectations. Considering that the company relies on the advantage of major customers to continue to cash profits and integrate with the future industrial chain, it maintains 2017-19 eps 0.54 plus 1.40 yuan, target price 27.54 yuan, and increases its holding rating.

The main business of commutator leader is sound, and new products continue to be invested. ① occupies 12% of the global share, has Bosch Group, Dechang Electric and other customers, overseas well-known motor enterprises supplier certification cycle of 2-3 years, high barriers; during the ② reporting period, the company continued to increase investment in new energy vehicle motors, electric controls, battery components and other new products, management expenses increased by 53% from January to September 2017 compared with the same period last year, and sales expenses increased by 30%. The third quarterly report of ③ expects the company's full-year return net profit in 2017 to range from 1.48 yuan to 167 million yuan, a year-on-year growth rate of 15%.

The integration of new product expansion and industrial chain is expected to open up the growth space. ① draws lessons from the experience of overseas leader Kolektor, and the integration of industrial chain is a shortcut for commutator enterprises to break through the industry ceiling. ② acquired German high-strength elastic parts business in the past 16 years, and high-elastic parts contributed 9120 million revenue in the first half of 2016 (revenue of 114 million yuan in 2017), a significant increase over the same period last year. In 2017, the company suspended trading for many times to acquire and integrate, and vertical integration is expected to open up room for growth.

Catalyst: new parts and components have been verified by major customers, and the industrial chain has been integrated and landed.

Risk hint: the industrial chain integration is lower than the expected risk.