Key investment points: iPhone X opens a new era of stainless steel frames, and high-end models of domestic mobile phone brands are expected to follow suit. The iPhone X is officially on the market. Drastic changes in body design and innovative upgrades in functionality compared to previous generations have attracted a large number of consumers to buy. We believe that a new era of smartphone exterior design innovation has begun. The “double-sided glass+stainless steel middle frame” design scheme will become a main line, and high-end models of domestic smartphone brands are expected to follow suit in the future. Stainless steel frame processing has improved markedly in terms of technical difficulty, process requirements, value, etc., and is both a challenge for manufacturers and a bigger cake. The complexity of mobile phone body materials is driving the rapid upgrading of processing equipment. Whether it is a 7 series aluminum (alloy) or stainless steel frame, smartphone body materials are generally moving towards a harder trend, which places higher demands on processing equipment, requires a spindle with higher rotation speed and better processing stability. We believe that the large number of new equipment driven by the last round of metallized airframes has gradually entered the replacement stage. We expect that the stock market size to be replaced exceeds 100,000 units, and the next few years will be the main support force for industry demand. Strong downstream manufacturers have strengthened their competitive strength through the expansion of production in the capital market. Since 2017, powerful manufacturers such as Coson Technology (IPO), Fuchengda (acquired by Fenda Technology), and Lingyi Technology (under the shell of Jiangfan Magnetic Materials) have successively entered the capital market. Expanding production capacity after raising capital is an important measure to guarantee their market competitiveness and share. At the same time, powerful Apple and non-Apple manufacturers are also facing adjustment pressure on the supply chain side. Technological breakthroughs and capacity expansion will be powerful means to compete for share. We believe that the downstream manufacturing and foundry industry will gradually enter an era where the strong are strong, and in this process, powerful manufacturers all have greater motivation to expand production capacity. In particular, investment in advanced equipment production capacity is expected to continue to increase. The prosperity of the industry is expected to continue in 2018, and domestic CNC leaders are expected to continue to gain strength. Overall sales in the CNC market were booming in 2017. Affected by a large number of new purchases from customer A, the supply of industry leader Huanuco has always been tight, and the delivery period for some customers was delayed by more than six months at one point. The sales volume of domestic equipment also increased significantly over the same period last year, and the share of leading manufacturers continued to rise. We expect the industry to maintain a high level of prosperity in 2018, and domestic equipment is expected to continue to increase its share due to its obvious cost performance advantage. Runxing Technology has sufficient orders on hand, and the continuous expansion of production capacity indicates that high growth in 2018 can be expected. Due to the good order situation this year, Runxing has greatly expanded its production capacity, from about 500 units/month at the beginning of the year to 1000 units/month now, and there are plans for future expansion. We believe that after the completion of this restructuring, the company will have sufficient capital strength. 2017-2018 coincided with an upward cycle of industry prosperity. The company has great flexibility in expanding both well-known domestic and foreign customers or small domestic customers, and high performance growth is worth looking forward to. Raise the profit forecast and maintain the “buy” rating. Considering the gradual clarity of the industry boom in 2018 and the greater flexibility of the equipment sales side after the company's restructuring and listing, we have raised the company's profit forecast for 2017-2019. The estimated net profit is 1.40/6.19/750 million yuan, respectively. The acquisition of Runxing Technology has been successfully implemented (completed at the end of September), and the payment consideration portion for additional shares has been listed and will be consolidated starting in the fourth quarter of 2017. However, since the supporting financing for the company's additional issuance has not yet been completed (expected to be completed by the end of November), we assume that the issuance will be based on 10 yuan/share and a total of 86 million additional shares, then the company's share capital after issuance will increase to 1,014 million shares, and the corresponding EPS is 0.14/0.61/0.74 yuan. Considering Runxing Technology's good growth potential, we gave it 30 times PE in 2018, with a target price of 18.30 yuan to maintain its “buy” rating. Profit forecast instructions. 1) We believe that the CNC industry is expected to maintain a high level of prosperity in the next two years. According to our estimates in our in-depth report “5G Dongfeng, Domestic 3C Processing Equipment on the Rise”, the industry's annual growth rate is expected to reach 25%-32%, and domestic listed CNC manufacturers are expected to maintain a relatively rapid increase in sales volume. 2) Runxing Technology's revenue in 2017 was 360 million yuan, mainly due to its 2017 Q4 merger. We estimate that its revenue for the full year of 2017 will be around 1.4 billion yuan. We believe that after the restructuring and listing of Runxing Technology, its popularity and influence in the industry have greatly increased, and there is greater flexibility in customer channel development. It has also avoided the problem of low average sales prices caused by its previous reliance on the top few major customers. It is expected that there will be some room for increase in the average price of products sold in the future. Judging from the current expansion of the company's production capacity, the shipment volume in 2018 is expected to exceed 10,000 units. According to the average price estimate of 200,000 units per unit, we expect the revenue scale to reach 2 billion yuan. Considering equipment delivery and revenue recognition issues, we estimate the operating income for 2018-2019 to be 1.8/22 billion yuan, respectively, in line with industry growth. Risk warning. Macroeconomic downturn; CNC equipment sales fell short of expectations.