Guide to this report: The decline in the unit price of electric compressor products and the increase in costs have led to a decline in gross margin (-4% year-on-year), which is expected to ease in 2018. Investment points: Maintain the company's “excess holdings” rating. The company had revenue of 1,115 billion yuan (-12%) for the third quarter and net profit of 63 million yuan (-22%) after deducting non-return net profit of 63 million yuan (-22%). The main reason why the performance fell short of expectations was the decline in gross margin caused by the decline in sales prices of electric compressor products. According to the company's performance guidelines, the 17/18 EPS was slightly lowered to 0.14/0.19 yuan (previously 0.17/0.21 yuan), maintaining the target price of 6.3 yuan. The decline in overall gross margin (-2.4% month-on-month, -4.57% yoy) was mainly affected by compressor products (-5% yoy) and is expected to improve in 2018. In addition to the decline in profitability brought about by lower product prices, the company put into operation a new production line of 300,000 electric air conditioning compressors in the first half of the year. Currently, the capacity utilization rate is not high, which has indirectly increased costs and amortization. We expect a significant increase in profitability in 2018 as downstream customers such as Zotye, Chery, and Changan increase in sales volume of new energy vehicles. The development of new customers for electric compressors is progressing steadily. Growth can be expected. Since 2017, the company has become a compressor supplier for FAW-VW New Energy, NIO, and VW Germany (MEB platform). The increase in the share of electric compressor sales will drive an increase in gross margin. In addition, in the field of traditional compressors, the company's cooperation with new customers such as French Peugeot, German Volkswagen, and Jaguar Land Rover is progressing steadily. Both traditional compressors and electric compressors have brought steady growth. Catalysts: Entering the supply chain of new brands and order execution. Risk warning: Sales of new energy vehicles have declined sharply.