Investment Advising Company's 1-3Q operating income was 38.0 billion yuan, up 2.4% year on year; net profit was 250 million yuan, down 7.5% year on year, lower than our expectations. Considering: 1) the withdrawal of the 18-year purchase tax concession, the main scroll compressor business continues to be under pressure; 2) 18 is a vacuum period for new orders. We downgraded the company to a neutral rating. The reasons are as follows: The main compressor industry has missed opportunities for consumption upgrading and industry differentiation. Since the beginning of the year, the passenger car industry has shown a pattern of differentiation, with independent brands breaking out frequently, while sales of some mid-range and low-end models have declined sharply year over year. The main customers of Nanjing Aotejia are mid-range and low-end small-displacement models, making it difficult to share the growth opportunities of independent growth. The purchase tax concessions were completely withdrawn in '18, and demand for small to medium emissions is likely to remain sluggish; although the piston compressor business (Fortis Air Conditioning) has achieved relatively rapid growth, its base is low, making it difficult to change the overall situation. The unit price of the electric compressor business has declined, and competition has intensified. 2H16 BAIC withdrew from the company's supply chain, and BYD's return was slower than expected, leading to a year-on-year decline in the company's electric compressor sales in the first three quarters. Combined with the decline in unit prices, the share of revenue declined. Competitors such as Huayu Sandian and Haili have entered the field of electric compressors one after another, and there is a risk that the company's market share will decline further. Ongoing orders are concentrated on starting production in 19-20, and we look forward to opening up room for growth. The company's current orders include European Volkswagen MEB and MQB platform orders, FAW-Volkswagen MQB electric vehicle orders, etc., and will focus on starting production in 2019-2020. Furthermore, the piston compressor business also has great potential. What is our biggest difference from the market? The market has overestimated the elasticity of the electric compressor business to a certain extent. We believe that under the optimistic assumption that the industry's sales volume of 2 million new energy vehicles in 2020, the company's 30% market share, and the net profit of a single unit is 200 yuan, the increase in domestic electric compressor business performance in 2020 contributed 120 million yuan, corresponding to 30% of the net profit in 2017. Potential catalyst: Obtaining substantial new customer orders and opening up room for piston business growth. Profit forecast and valuation We reduced the net profit attributable to the parent company in 2017 and 2018 by 10.6% and 14.5% from $500 million and $590 million to $450 million and $5.1 billion respectively, and reduced the target price by 16% from $5.4 to $4.5 million, corresponding to 28x 2018e P/E. Risk performance exceeded expectations, and the decline in raw material prices led to an increase in gross profit.