Incidents On October 20, the company released its three-quarter report. The first three quarters of 2017 achieved operating income of 1,142 billion yuan, a year-on-year decrease of 22.05%, and realized net profit of 132 million yuan, a year-on-year decrease of 42.77%. The performance of the Third Quarterly Report has declined. The main business scope of the company focusing on military and new energy strategic transformation is to provide customized digital TV smart terminal hardware and systems for various TV operators around the world. The products include cable TV set-top boxes, satellite TV set-top boxes, wireless TV set-top boxes, Internet TV set-top boxes, and other smart TV terminals. The main customers include global cable TV, satellite TV and Internet TV program operators. The company's products cover many countries and regions around the world, with a domestic market share of nearly 10%. The domestic market share is close to 10%. The volume of cable digital TV set-top box products ranked in the top three in the domestic industry. The business scale and profitability rank among the highest in the domestic industry. The reason for the decline in the company's three-quarter report performance is due to a sharp increase in the prices of some raw materials such as DDR memory chips, flash memory chips, PCB circuit boards, and steel plates used in set-top boxes, leading to cost increases and gross margin decreases. The set-top box business has declined significantly, focusing on the strategic transformation of military and new energy. It is expected that the profit level of the company's set-top box business will decline significantly throughout 2017. The company will optimize this business, reduce detailed costs and expenses, and at the same time actively carry out a strategic transformation to the military equipment and new energy electric vehicle industry. The company's military products continue to be abundant, and its business field continues to expand, and military revenue is expected to continue to rise in the future; benefiting from the company's technological leadership and huge market space in the NEV industry, the company's electric vehicle sector is expected to experience relatively rapid growth. The military business continues to expand, and the military market space is huge. The military market is focusing on expanding business areas to ensure the continuous growth of the military business. Most of our army's weapons and equipment have been in service for a long time and are not very modern. Most of the equipment requires informatization transformation. The company's military intelligent power systems, intelligent vehicle motor equipment and other products benefit from military system reform and the in-depth implementation of civil-military integration policies, and have extended from supporting a single military class to the entire army system. In 2016, the company researched new technology and developed new products in response to the specific needs of various units in the military industry. Projects such as intelligent power supply and distribution systems, environmental control systems, landmine disposal control systems, and health management systems have entered the gradual implementation stage. At present, the company's new military customers and military system projects and model projects have increased markedly, and the business field has also expanded from Army support to projects such as the Air Force and Rocket Force. The company's continuous enrichment of military products and continuous expansion of business areas will provide a strong guarantee for the continued growth of the military goods business in the future. The profit level of set-top boxes in the civilian market declined in 2017. In 2017, prices of some raw materials such as DDR memory, flash memory, PCB circuit boards, and steel plates for set-top boxes rose sharply, leading to cost increases, and set-top box shipments, gross profit margin, and net interest rate declined. It is expected that the profit level of the set-top box business will drop significantly throughout 2017. The company will actively reduce costs and expenses, reduce detailed costs and expenses, while actively transitioning to military equipment and new energy strategies. The key components of electric vehicles are technologically advanced, and the market space is huge. The company's new energy electric vehicle parts products and technology are in a leading position in the industry, and has successfully entered the supplier system for mainstream customers in the NEV industry. In 2016, in order to cope with the adjustments in the NEV industry, the company successfully developed various products such as the on-board charger series and the in-vehicle DC/DC series, laying a solid foundation for the company's next product development and marketing. According to estimates, it is estimated that by 2020, the number of electric vehicles owned nationwide will exceed 5 million, more than 12,000 centralized charging stations will be added, and more than 4.8 million decentralized charging stations will be added. There is still huge room for growth in key equipment for new energy electric vehicles. Benefiting from technological leadership and huge market space, the company's NEV key components business is expected to maintain relatively rapid growth over the long term. Share repurchases demonstrate confidence, and employee shareholding stimulates vitality. From July to October 2017, the company carried out a total of 4 repurchases, with a cumulative repurchase amount of more than 260 million yuan. Frequent and extensive repurchases fully demonstrate that management is optimistic about the future of the company. In March 2016, the company implemented an employee equity incentive plan. The nine incentive targets were all managers and core technology and business backbone of the subsidiary Jiasheng Power Company. The implementation of employee shareholding this time is conducive to stimulating the enthusiasm of key employees in subsidiaries and to the future development of the company's NEV business sector. In October 2016, the company completed a non-public stock offering to raise 1,555 billion yuan. The capital was used for the construction of key components for new energy vehicles and smart mechanical and electrical products, which will effectively enhance the company's business level and industry competitiveness. Profit forecasting and investment ratings: Short-term twists and turns do not hinder long-term development. Maintaining buying ratings In 2017, the profit level of the company's smart terminal business is expected to decline significantly, which is putting a lot of pressure on the company's annual performance. As raw material price increases spread downstream and the company implements cost-saving measures, the declining gross margin of set-top boxes is expected to improve slightly, and the new energy industry is also expected to return to a rapid growth path. The company's net profit from 2017 to 2019 is estimated to be 242 million yuan, 310 million yuan, and 402 million yuan, respectively, with year-on-year increases of -22%, 28%, and 30%, respectively. The corresponding EPS for 17 to 19 was 0.21, 0.27, and 0.35 yuan respectively, corresponding to the current stock price PE, 35, 27, and 21 times, respectively, maintaining the buying rating.