The results for the first three quarters of 2017 are in line with expectations, Jiangsu Cathay Pacific announced the results for the first three quarters of 2017: operating income of 25.615 billion yuan, up 16.1% year on year; net profit attributable to the parent company was 598 million yuan, up 56.4% year on year, corresponding to earnings of 0.38 yuan per share. The company expects net profit of 757 million yuan to 919 million yuan in 2017, an increase of 40% to 70% over the previous year. The development trend is accelerating the development of new chemical materials and new energy businesses. Huarong Chemical, a holding subsidiary, is actively promoting technical improvement projects for lithium battery electrolytes with an annual output of 20,000 tons, and lithium-ion power battery electrolyte projects with an annual output of 40,000 tons in the CATL plant area. The company invested in the establishment of Ruitai New Energy, a wholly-owned subsidiary, in February to actively build a development platform for new chemical materials and new energy businesses. In August, the company announced that the company transferred its shares in Chaowei New Materials and Chaowei New Materials held by Huarong Chemical to Ruitai New Energy to promote the integration of internal resources. The downstream NEV market is expected to drive the growth of new energy businesses such as electrolytes. NEVs account for about 50% of the historical 4Q peak sales season. We are optimistic that NEV sales will increase dramatically from 4Q17 to 2018. We expect sales of NEVs to be 700/1.1 million units in 2017/18, with a year-on-year growth rate of 38%/57%, driving an increase in electrolyte shipments. The holding subsidiary Huarong Chemical specializes in lithium battery electrolytes and silane coupling agents. The product is positioned as high-end, has advantages in R&D, production, and sales, and is expected to benefit from the rapid growth in downstream demand. Promote supply chain business development and optimize organizational structure. At the end of 2016, the company completed the acquisition of 11 trade service companies under the same controller, Cathay Pacific Group. The company's headquarters (parent company) is intended to be a holding company, and the specific business is mainly carried out through subsidiaries. In September 2017, the company announced the internal transfer of 8 wholly-owned and holding subsidiaries to the subsidiaries Yisheng Industrial, Guomao Industrial, Guosheng Industrial, and Bochuang Industrial, which is beneficial to the company's organizational structure. Furthermore, the current garment industry base project in Myanmar is expected to be put into operation by the end of this year. The profit forecast is that the chemical new energy and supply chain business will drive performance growth. According to the company's expected performance range, we raised our 2017 and 2018 earnings forecasts per share by 19% and 19% from RMB 0.43 and RMB 0.51 to RMB 0.51 and 0.61 respectively. Valuation and recommendations Currently, the company's stock price corresponds to 20 times and 16 times the 2017/2018 P/E. We maintain the recommended rating and target price of RMB 13.08, which has room for an increase of 30.90% from the current stock price. The target price corresponds to 26x and 21x P/E in 17/18. Risk The NEV market is weak, and the integration of internal resources falls short of expectations.