Event: The company released its 2017 three-quarter report. The first three quarters achieved revenue of 114 million yuan, a year-on-year decrease of 0.45%, net profit of 22.55 million yuan, a year-on-year increase of 4.15%, and basic earnings per share of 0.25 yuan, a year-on-year decrease of 21.89%. Opinion: Due to the military order delivery carry-over cycle, the overall performance was slightly lower than expected, and there were signs of stabilization in the third quarter. The company specializes in aviation inertial guidance products, aero engine parameter collectors, electronic control systems, and drone business. Customers mainly target the domestic military, so order delivery carry-over is clearly cyclical, and delivery carry-over is often at its peak at the end of the year. In the first three quarters, the company achieved revenue of 114 million yuan (-0.45%), net profit of 22.55 million yuan (+4.5%), and net profit of 5.99 million yuan (+77.12%) in a single quarter, gradually showing signs of stabilization. We judge that with the arrival of a peak carry-over, the company's annual performance is expected to grow steadily. The balance ratio continued to improve, and the gross profit margin, operating profit margin, and expense ratio indicators for the third quarter all improved markedly compared to the same period last year. Compared with the same period last year, in the third quarter of this year, gross margin increased by 4.05 pct, operating profit margin increased by 8.24 pct, and the three cost ratios decreased by 2.82 pct, all of which improved markedly. At the same time, the balance ratio continued to fall to 18.96% after listing. Aeronautical inertial guidance products are the company's largest main business, and are most clearly affected by the delivery cycle. Focus is on the release of fourth quarter results. The company's inertial guidance products are mainly used in aviation fields such as helicopters. In 2016, the company's aviation inertial navigation products accounted for nearly 70% of revenue, and the market position was relatively stable. However, in the first half of this year, the revenue of inertial guidance products fell 29.1% year-on-year due to the impact of the order delivery cycle. It is recommended to focus on the release of performance in the fourth quarter. Optimistic about the rapid growth of the new business, the aero-engine electronics business and drone products are expected to open up new markets. The company's aero engine electronics products include parameter collectors and electronic control systems. Digital electronic control technology with full authority for aero engines is the core technology of Chenxi Airlines, and it is also one of the important trends in future equipment informatization upgrades. Benefiting from mass production of the new flight control computer product, the sector achieved revenue of 19.06 million yuan in the first half of the year, a significant increase of 120.66% over the previous year. Companies that benefit from military reform and civil-military integration are scarce targets of aviation informatization. Currently, the sales target for military users is basically military users. The northwest region, where it is located, accounted for 50% in 2016. The company also has a scarce target for aviation informatization core technologies such as navigation, control, communications, and aviation computers. It has a rich product line and stable customer resources. It is expected that it will continue to benefit from the advancement of military reform and the further implementation of the civil-military integration strategy in the future. Conclusion: The company has professional technical advantages and more than 10 years of military support and service experience in the field of inertial integrated navigation and engine electronics. Revenue growth and gross margin are stable. While consolidating the market advantages of aviation inertial navigation products and aero engine parameter collectors, the company is committed to increasing the business scale in the field of aero engine electronic control systems and drones, which is a scarce target of aviation equipment informatization and civil-military integration policies. We expect the company's revenue in 2017-2019 to be 229/2.73/351 million yuan, EPS of 0.68/0.84/1.07 yuan, and corresponding PE of 60.35/49.29/38.45 times, respectively, maintaining the company's “recommended” rating. Risk warning: Engine electronic control system business expansion fell short of expectations; custom business order delivery and carry-over fell short of expectations.