Event: the company released its annual report for 2017, with an annual operating income of 1.781 billion yuan, a decrease of 16.83%, and a net profit of 128 million yuan, a decrease of 22.41%.

The delay in the construction and confirmation of the project caused the annual revenue recognition to be lower than expected. Due to the postponement of the project design in the first half of 17 years, the progress of the project was delayed, and the actual construction and confirmation were lower than expected in the second half of the year. at the same time, the company's R & D expenses increased by 47% to 44 million over the previous year, resulting in an increase in management expenses. The gross profit margin is basically the same as last year, while the net profit margin has dropped slightly to 7.2%, which is a drag on the performance.

Domestic panel and semiconductor industry investment heat continues, has been widely recognized by the market, clean room project is the first to benefit. According to the proportion of the business of the analysis company, the main business is almost entirely occupied by semiconductors and panel projects. Under the background of national will and industrial transfer, in the next few years, the annual average market space of clean room EPC in China's semiconductor and panel industry will reach 60 billion. With the company's current industry status and market share, there will be more room for improvement.

Taiwan semiconductors and panel production capacity has been transferred to the mainland, and Taiwan Ya Xiang has obvious advantages. In recent years, the transfer trend of Taiwan semiconductor and panel production capacity to the mainland is clear. As one of the two Taiwan system integration enterprises, the company deeply ploughs the domestic clean room field, has obvious advantages to undertake, and has become the preferred enterprise for clean room engineering.

There are plenty of orders on hand, and the 18-year performance has high certainty. According to the public information, the announced orders since 2017 have reached 4.055 billion yuan (unfinished 1.525 billion, Changxin Project 769 million, Jinhua Project 796 million, Huaxing Optoelectronics 233 million, Foxconn 732 million). At present, the 2017 annual report revealed that the orders for uncompleted 3.98 billion and Foxconn 732 million in March were basically completed in 18 years. And 2.3 billion of these projects will be completed in the first half of 18 years. According to the confirmed revenue mode and construction progress, it is expected to reach a confirmation peak in the second and third quarters of this year.

Investment suggestion: considering the construction progress and revenue recognition, the company's net profit from 2018 to 2020 is expected to be 276 million, 3.62,443 million, corresponding to EPS 1.29,1.69,2.08 yuan, corresponding to PE is 18 times, 14 times and 11 times, given a "buy" rating.

Risk hint: project implementation and revenue recognition are not as expected