Incident: The company announced that it plans to sign a major contract with the parent company Taihai Group, with an amount not exceeding 3.65 billion yuan to mainly sell products such as container forgings to the Taihai Group. The execution period of the contract is until the end of 2020, and the net profit is expected to increase by 200-600 million yuan every year. Comment: It is planned to sign a large order of 3.65 billion yuan with the parent company to achieve substantial development of new business. Through years of development, the Taihai Group has now initially formed a complete industrial chain from material preparation to molding and processing. Use the Group's strong market conditions to expand sales channels for the company. This time, we received a large purchase order of 3.65 billion yuan from the parent company, which will significantly increase the number of orders in hand. It is estimated that net profit will increase by 200-600 million yuan every year by 2020. The announcement stated that there was no relevant business contract with the Group in 2016. According to the announcement, related transactions with the Group in 2015, 2016, and the first half of 2017 were 625 million yuan, 289 million yuan, and 445 million yuan respectively. There is reason to believe that this contract is a substantial expansion of the company's new business and is expected to further open up potential space for long-term growth. The steady advancement of onshore nuclear power is driving 100 billion equipment space, and offshore nuclear power construction has brought new driving force. In August 2017, China Nuclear Power announced that five companies including Shanghai Electric will jointly invest 1 billion yuan to establish CNNC Offshore Nuclear Power Development Co., Ltd., whose main business is the development, construction and operation of marine nuclear power equipment. In the civilian field, marine nuclear power equipment can provide reliable and stable electricity supply, heating, and seawater desalination in fields such as offshore oil and gas field mining, island development, etc., and can also provide propulsion power for icebreakers. It also has many uses in the military field. According to a report from Sohu.com, in the future, China will build nearly 20 offshore nuclear power plants on the islands and reefs of the South China Sea. It is estimated that each offshore nuclear power platform will invest about 2 billion yuan, and the total cost of 20 offshore nuclear power platforms is about 40 billion yuan. According to China Nuclear Energy, at the end of 2017, CNNC announced the commencement of civil construction for the demonstration fast reactor project. This is the first domestic nuclear power project since 2015. According to the Science and Technology Daily, the assembly materials expert meeting for Sanmen Unit 1 and Haiyang Unit 1 was organized by the Ministry of Environmental Protection, the Development and Reform Commission, the State Assets Administration, the Ministry of Industry and Information Technology, the Energy Administration, and the National Defense Bureau of Science, Technology and Industry, which means that the AP1000 loading is progressing smoothly. The “13th Five-Year Plan for Nuclear Power” has a capacity of 88 million kilowatts of nuclear motor assembly machines under construction and operation in 2020. Based on this calculation, it will drive the nuclear power equipment market of nearly 100 billion dollars in the future. Plan to increase capital investment in nuclear power equipment modular projects to actively enhance the first-mover advantage in the field of small nuclear power reactors. The non-public offering plan was announced on November 11, 2017. It is proposed to issue no more than 173 million shares and raise no more than 3,499 billion yuan to invest in modular manufacturing projects for nuclear power equipment, which is expected to solve the production difficulties of small reactor pipelines and small nuclear reactor vessel forgings, form heavy manufacturing and integrated manufacturing capabilities, and gain a first-mover advantage in the small nuclear power reactor market. The controlling shareholder Taihai Group promised to subscribe for no less than 50%, showing firm confidence in development. Investment proposal: Revenue for 2017-2019 is estimated to be RMB 3,084 billion, RMB 3,590 billion, RMB 4,038 billion, and net profit of RMB 1,047 billion, RMB 1,151 billion and RMB 1,373 billion, respectively. The company continues to build three major businesses: nuclear power equipment, nuclear military industry, and nuclear waste treatment, and the market space is gradually opening up. Maintaining a buy-A investment rating, the 6-month target price is 33.25 yuan, which corresponds to a dynamic price-earnings ratio of 25 times in 2018. Risk warning: downstream demand falls short of expectations, new business development falls short of expectations, fund-raising projects fall short of expectations