The performance of key investment points declined year on year, improving significantly from month to month. Huaying Agriculture announced its 2017 three-quarter report. From the beginning of the year to the end of the reporting period, it achieved operating income of 2,889 million yuan, a year-on-year increase of 62.14%; net profit of 48 million yuan, a year-on-year decrease of -46.85%; and net profit after deducting $39 million, a year-on-year decrease of 11.99%. Among them, the third quarter achieved operating income of 1.24 billion yuan, an increase of 29.61% over the previous month, and net profit of 32 million yuan, an increase of 290.73% over the previous quarter. The year-on-year increase on the revenue side was mainly due to the growth of consolidated subsidiaries Huaying Xintang and Huaying Shunchang. The year-on-year decline and month-on-month improvement in performance was mainly due to the decline in duck prices in the first half of the year and the recovery in duck prices in the second half of the year. The company expects net profit of 34.41% to +9.32% on a year-on-year basis in 2017. In addition, a reduction of 36 million yuan in government subsidies over the same period will also affect 2017 performance. Environmental pressure is heavy, and duck prices are rising. Since August, as the Central Environmental Protection Inspection Team has been stationed in Shandong and various counties and cities have introduced a number of policies, the poultry industry chain has been under heavy pressure. It is expected that 30%-40% of production capacity will be affected in the short term. Duck prices started to rise. The average price of duck fry Q3 was 3.06 yuan/feather, up 173.92% month on month, up 5.92% year on year; meat duck Q3 average price was 6.88 yuan/kg, up 31% month on month and 11% year on year. Looking at the whole year; the price of down in Q3 rose 24% month-on-month and 90% year-on-year. Looking at the whole year, the upward trend in duck prices has already been determined. Production capacity is expanding, and profit release can be expected. The improved market conditions combined with the commencement of early projects are expected. It is expected that the company's annual production capacity for poultry seedlings will reach 200 million birds (up 33% from the previous year), the production capacity for meat and poultry slaughter will reach 150 million, and feathers and products will reach 1.8 billion. During the reporting period, the company set up a joint venture with Nan Hongyuan Duck Industry, and Fangtian Poultry Co., Ltd. jointly funded the establishment of the Xincai Huaying subsidiary to further expand breeding capacity; the subsidiary Huaying Xintang invested 550 million yuan in a 30,000 ton feather processing project in Huangchuan County. The production capacity of the down business expanded again, and future profit release can be expected. Integrated leader for meat duck breeding. Focusing on the breeding and slaughter of duck seedlings, the company continues to expand its industrial chain into the field of down and cooked food. Its Huazixue down and Xintang down are selling well. In the field of cooked food, the company set up a merger and acquisition fund to acquire Heze Huayun Food and Shunchang Agriculture, and set up Huaying Biotech to operate duck blood business. During the reporting period, the company set up a joint venture with Xiamen Huashang Foods to further deepen its layout in the cooked food sector. Risk warning. 1. The growth rate of the industry is slowing down; 2. The widespread outbreak of the epidemic; 3. The launch of new products falls short of expectations. Profit forecasts and valuations. Looking at the medium to long term, it is expected that the removal of production capacity will drive a full rise in duck prices, and the company will benefit the most as an integrated leader. We expect the company's EPS for 2017/18/19 to be 0.14/0.44/0.61 yuan per share, giving it 31 times the PE valuation in 2018, with a target price of 13.64 yuan, covering the “increase in holdings” rating for the first time.