Investment highlights In 2017, performance increased by 40%. Large companies with flexible performance in 2018-2020 released their 2017 annual reports. In 2017, they achieved revenue of RMB 21.8 billion, a decrease of 10% over the previous year, and realized net profit of 300 million yuan, an increase of 41% over the previous year. The dividend plan is to distribute cash of RMB 0.5 (tax included) for every 10 shares, and use the capital reserve fund to transfer 2 shares for every 10 shares to all shareholders. We believe that while revenue declined, the company achieved a significant increase in performance, reflecting the gradual restoration of the company's balance sheet and a significant increase in profit levels. As global container shipping continues to pick up and the oil service industry is booming, we believe the company is expected to unleash greater performance elasticity in 2018-2020. The company's profit situation has improved markedly. The offshore equipment business is expected to provide greater performance and flexibility. The company's new contract amount for the port machinery business in 2017 was US$2.52 billion, a slight decrease of 3.7% from the previous year; the new contract amount for the offshore steel structure related business was US$714 million, up 33% year on year; and the new investment business contract amount was RMB 12.3 billion, up 23% year on year. Since port machinery lags behind the shipping cycle by 1-2 years, the 23% year-on-year decline in container crane business revenue in 2017 reflects the relatively sluggish consolidation market in 2016. With the overall recovery of the shipping market from 2017, the company's container crane business is expected to rebound in 2018; the company's heavy equipment business revenue increased 163% year on year, gross margin increased by 8.5 pct, and profit conditions improved markedly. We believe that the company's offshore equipment asset impairment plan is adequate, and the risks are clear. As international global oil and gas exploration capital expenditure continues to pick up, the offshore equipment business is expected to provide greater performance flexibility in the future. The upward shift in the international oil price center is expected to drive the oil and gas equipment and service industry to rebound starting at the bottom of about 26 US dollars/barrel in early 2016. International oil prices continued to fluctuate upward, continuously consolidating the price center, and oil distribution once broke through the $70 mark. As the oil price stabilizes at a platform of 55-65 US dollars/barrel, the oil and gas equipment and service sector is expected to gradually move from investment in the theme of rising oil prices to fundamental investment, which is expected to usher in strategic investment opportunities similar to the recovery of construction machinery in 2016. The controlling shareholder was changed to China Communications Group. The state-owned enterprise reform is expected to accelerate the transfer of a total of 1.32 billion shares (accounting for 29.99% of the company's share capital) to the actual controller China Communications Group and its subsidiaries through an agreement transfer. After the change in equity, the controlling shareholder of the company changed from China Communications Construction to China Communications Group. China Communications Group is one of the pilot units for state-owned capital investment companies. As Zhenhua Heavy Industries changes from China Communications Group's Sun Company to a subsidiary, state-owned enterprise reform at the group level may accelerate. Investment advice: The company is a global leader in HAECO and has ranked first in the HAECO market share for many years. In recent years, it has continued to gain strength in business fields such as offshore engineering and investment, and various business fields have formed a good synergy effect. As the global economy continues to recover, the profitability level of the company's port aviation business has improved. Relying on China Communications Group to undertake major domestic and foreign infrastructure projects, it has benefited from “Belt and Road” port construction and PPP investment. After extensive asset impairment calculations in recent years, the company's offshore risk release has been sufficient, asset quality has improved markedly, and it has a high margin of safety. We judge that the company's performance is expected to exceed market expectations. The estimated EPS for 2018-2020 is 0.10/0.14/0.19 yuan, respectively, and the corresponding PE is 51/37/26 times. Maintain the “Overweight” rating. Risk warning: the risk of a downturn in the offshore equipment business; the risk of global trade falling short of expectations; and the reform of state-owned enterprises falling short of expectations.