1-3Q17 was in line with expectations, and Sichuan Changhong announced 1-3Q17 results: operating income of 54.4 billion yuan, up 12.3% year on year; net profit attributable to parent company was 167 million yuan, down 68% year on year, corresponding to profit of 0.036 yuan per share. In the third quarter, operating income was 19.7 billion yuan, up 25.2% year on year; net profit attributable to parent company was 13 million yuan, down 79% year on year. In the first three quarters of the development trend, the gross profit margin was 13.0%, down 1.9pct year on year; when there was no improvement in operations, expenses continued to be strictly controlled, and sales expenses and management expenses increased only 3.4% and 1.3% year on year, respectively. 3Q2017 revenue grew rapidly: 1) Benefiting from the rapid growth of the air conditioning business of the subsidiary Meiling Electric. 3Q2017, Meiling Electric's revenue increased by 31.8%, of which air conditioning benefited from the increase. Excluding Meiling Electric's revenue, Changhong's revenue increased 20%. 2) The company actively cooperates with Internet companies such as Xiaomi to undertake agency business. Among them, 3Q2017 helped Xiaomi launch Xiaomi air conditioners. Cost pressure still causes poor profitability: 1) In 3Q2017, gross margin continued to decline to 11.7%, down 3.0 pct year on year and 2.2 pct month on month. Price pressure on raw material costs is the main reason. 2) Subsidiaries Meiling Electric and Huayi Compression are also under cost pressure, and profitability has declined. 3) The color TV business is still not profitable. Although panel costs have declined, transmission to the company's profit side is not significant. The profit forecast maintained the profit forecast. EPS for 2017 and 2018 was 0.09 and 0.10 yuan, down 26.3% year on year and up 16.8%, respectively. Valuation and recommendations Currently, the company's stock price corresponds to 42.2x 2017e P/E. We maintain a neutral rating and target price of RMB 4.00, which is 5.26% higher than the current stock price. Risk The risk of competition in the color TV market.