Key investment points The total capacity grew for three consecutive years. The total number of passenger seats in 15/16/17 was 5925/9538/11722, respectively, with annual increases of 3613 seats and 2184 seats, respectively. The 16/17 growth rates were 61.0% (of which 49% increase came from acquisitions) and 22.9%, respectively. The company raised capital during its IPO and put into operation a new 600-seater ordinary passenger ship in 2016. 718 new luxury passenger ships and 2 360-seat luxury passenger ships completed their maiden voyage in '17. Coupled with the acquisition of Bohai Changtong in 2016, which obtained a total capacity of 2,893 ships, 16/17 was the peak period of the company's capacity growth, helping tourism performance to grow at a high rate in '18. The company's capacity distribution structure has changed. By route, the capacity of Beijiao, Nanhai, Pengchang and sea cruise routes in 17 was 4902/1449/4459/912 seats respectively, an increase of 0%/70%/23% /NA over the previous year. In '17, the new capacity was mainly invested in the Pengchang Line, the South China Sea, and maritime travel, and net profit will gradually be released in '18. The capacity of the Beiwei route is expected to stabilize at around 4,900 seats; the company concentrated its additional capacity on the Pengchang route, adding 2,899 new passenger seats every year in 16/17; the number of passenger seats will reach 1,668 in 19 years from zero. Increased capacity, anticipated price increases brought about by product upgrades, and the rapid development of the sea travel business helped the net profit of the tourism business to contribute rapidly. Net profit contributed 1.11/127/188 million in 16/17/18. Looking at the ratio of newly built ships to old ships, with the exception of the Beiwei route in '18 (Beiwei's capacity was relatively stable; new ships only went to sea in '19), the proportion of new ships less than 1 year old was over 50%. Product updates and upgrades are expected to drive a significant increase in ticket prices. Take the South China Sea route as an example. The minimum fare for the old ship “Beibu Gulf 1” is 140 yuan and the maximum is 400 yuan, while the fare range for the newly introduced luxury passenger liner “Beibu Gulf 66” is 250 yuan to 2,088 yuan. It is expected that there is still room for future ticket price increases. Considering the company's intensive investment in new ships with higher service quality in 16/17, the increase in performance is expected to exceed the increase in capacity. The intelligent cognitive business space is broad. The company is the builder of the National Laboratory and the leader in cognitive business technology. Taking into account gambling and the company's early R&D investment, we predict that the cognitive business will contribute revenue of $335/13.33/17.17 million yuan and net profit of $0.59/166 million in 16/17/18. The company has constructed a project for innovative capacity building in the field of smart security organized and implemented by the National Development and Reform Commission - the National Engineering Laboratory for Integrated Command and Dispatch Technology. It is the only private enterprise among the leading enterprises in the list of national engineering laboratories in the field of social security prevention and control, with outstanding technical advantages. The collaborative business “smart tourism” is gradually expanding, and the market space may reach 10 billion dollars. The moat effect of the company's combination of travel scenarios and resource elements such as cognitive technology is obvious. The company has now carried out smart tourism research and development at the Nanwan Crocodile Mountain Scenic Area on Weizhou Island in accordance with the cooperation agreement. According to preliminary estimates, the cost of a single scenic spot with a smart tourism system is around 10 million to 20 million yuan. Currently, there are 1,644 scenic spots above grade 3A in China. Based on this calculation, we expect the smart tourism market to reach more than 10 billion yuan. Profit forecasting, valuation and investment advice: buy rating. We estimate that the net profit of the company withheld from mother in 17/18/19 will be: 2.87/394/449 million, respectively, and the corresponding PE is 32/24/21 times, respectively. Considering the upward elasticity of profits after the launch of the new ship, the growth of future island tours, and the high growth of the cognitive business, we were given 35 times PE in 18 years, with a reasonable market value of 13.79 billion yuan, corresponding to a target price of 39.5 yuan. Risk warning: marine travel market demand risk, loss of exclusive management rights risk, loss of technical advantage risk, investment project risk.