Core views: 1. Incidents The company released its three-quarter report. The company achieved operating income of 904 million yuan in the first three quarters of 2017, an increase of 130.79% over the previous year; net profit of 143 million yuan, an increase of 265.65% over the previous year. The company achieved revenue of 361 million yuan in the third quarter, an increase of 125.78% over the previous year, and net profit of 608.53 million yuan, an increase of 219.57% over the previous year. 2. Our analysis and judgment (1) Benefiting from the boom in industry segments, the company's performance increased dramatically. In 2017, the lithium battery, PCB, LCD module and LED industries continued to improve. Benefiting from these booming industries, the company's performance achieved significant growth. The company expects a significant increase in net profit in 2017 compared to the previous year. The main reasons are the technological upgrading of the company's intelligent equipment, new materials and other products, enhancing the company's market competitiveness; the sales scale of the lithium battery testing equipment business continues to expand, and sales revenue is growing steadily; and the company's wholly-owned subsidiaries, Jiyin Technology, Peng Yuwei, and Xuanshuo Zhizao, are doing well, increasing the company's performance. The company attaches importance to R&D investment, which has played an important role in promoting the upgrading and innovation of the company's products and technology, and has become a driving force for the company to achieve performance growth. (2) The integration of mergers and acquisitions progressed smoothly. The gross margin for the third quarter increased by 37.71% month-on-month, and the company's gross profit margin for the first half of the year was 37.71%, down 0.5 percentage points from the previous year. The year-on-year decline in gross margin of PCB precision processing testing equipment and LCD module automated assembly machine testing equipment was mainly due to low sales pricing for newly developed customers in order to quickly occupy new markets. The gross margin for the third quarter increased 2.5 percentage points month-on-month to 40.2%, and the gross margin for the first three quarters increased to 38.7% from 37.71% in the first half of the year. Net interest rate increased to 15.76% from 15.03% in the first half of the year. It can be seen that the company has been very effective in integrating mergers and acquisitions, and has achieved an increase in net profit. (3) There are sufficient orders for mergers and acquisitions of subsidiaries. It is expected that it can meet the performance commitment target. In the first half of the year, Jiyin Technology achieved net profit of 21.77 million yuan, and this year's promised net profit of 60.84 million yuan. The business conditions are good, and there is full confidence in fulfilling this year's performance commitment target. In the first half of the year, Peng Yuwei achieved operating income of 57.24 million yuan and net profit of 24.55 million yuan. Net profit of 32.5 million yuan and 42.25 million yuan was promised in 2017 and 2018. Currently, there are enough orders in hand, and it is expected that the target can be exceeded. In the first half of the year, Xuanshuo Intelligent Manufacturing achieved a net profit of 7.8339 million yuan, down from the same period in the first half of last year. Mainly, the delivery and acceptance cycle for large orders was long, and the revenue recognition conditions had not been met by the end of the reporting period. Xuanshuo Optoelectronics promised net profit of not less than 46.8 million yuan and 60.84 million yuan in 2017 and 2018. Acquire 80% of Shenzhen Jiukun Information Technology's shares to strengthen the soft power of intelligent manufacturing informatization. The Q9 CPS platform for intelligent manufacturing independently developed by Jiukun integrates the latest technologies of the Internet of Things and mobile Internet, and can provide platform-based support for enterprises to fully integrate informatization and industrialization. The products have been successfully used in various industries such as electronics, high-end machinery and equipment manufacturing, food and pharmaceuticals, textiles, warehousing and logistics. Typical examples include GM partner Guangdong Hongtu, Yilisheng Technology, Haopeng International, Lu Chang Technology, and Shangda Electronics DHL. In 2017-2020, net profit after deducting non-recurring profits and losses is not less than 6 million yuan, 9 million yuan, 12 million yuan, and 15 million yuan. (4) Production capacity is insufficient. Intelligent equipment industrial parks and refinancing expansion projects guarantee future growth space. As a system solution provider for high-end intelligent equipment, fully automatic production lines, and new materials in the PCB, LED, LCD, lithium battery, elevator, compressor and other industries, the company's current production capacity is not enough to support the rapid development in the future, and expanding production capacity has become an urgent need. The company plans to invest 350 million yuan in the first half of the year to prepare the Dongguan Intelligent Equipment Industrial Park, build an unmanned workshop, and integrate the subsidiary's 3C equipment and materials. It is expected that production will be fully put into operation in July 2018, and production capacity will increase 2-3 times after production is put into operation, increasing the market share and influence of the company's products. The company disclosed its refinancing plan on October 19. The company plans to issue no more than 39.42 million shares at market price to no more than 5 specific targets and raise no more than 930 million yuan for projects such as intelligent equipment manufacturing centers, expansion of production and technological transformation of functional film materials for FPCs, headquarters building construction and R&D center construction, etc., to consolidate and enhance the company's market position in the field of intelligent equipment and high-end electronic materials, and further enhance R&D capabilities. The intelligent equipment manufacturing center project plans to invest a total of 417 million yuan, mainly to invest in the expansion of production and technological transformation in the fields of high-end LCD module intelligent equipment, lithium battery intelligent equipment and elevator intelligent equipment. Currently, the company's production capacity is insufficient, and it has adopted a production model combining independent production and outsourced production. According to estimates, after delivery, the project is expected to achieve an average annual sales revenue of 607 million yuan, an average annual net profit of 126 million yuan, and an internal rate of return after tax of 26.90%. The total investment of FPC functional film materials and technological transformation projects is planned to be carried out by the subsidiary Nanchang Zhengye, mainly to enrich the product range, meet the needs of customers for one-stop procurement, and ensure the company's core competitiveness. According to estimates, after reaching delivery, the project is expected to achieve an average annual sales revenue of 380 million yuan, an average annual net profit of 42.7371 million yuan, and an internal rate of return after tax of 20.19%. 3. Profit forecast We slightly raised our profit forecast. We expect net profit of 219 million yuan, 330 million yuan, and 495 million yuan for 2017, 2018, and 2019, and EPS of 1.12 yuan, 1.68 yuan, and 2.51 yuan, corresponding to PE 32 times, 21 times, and 14 times. Considering that the company benefits from high-end intelligent equipment solution providers, benefits from increased demand in industries such as OLED, lithium battery equipment, elevators, smart home appliances, etc., and focuses on product research and development, the intelligent equipment industrial park's commissioning in the second half of next year and the construction of refinancing projects will lead to an exponential increase in production capacity, we maintain our recommended rating. 4. Risk indicates that the performance of mergers and acquisitions companies is lower than expected; the construction process of intelligent equipment industrial parks and production expansion projects is lower than expected risk.