Event: The company released its annual report. In 2017, it achieved revenue of 567 million yuan, an increase of 35.34%, net profit of 123 million yuan, an increase of 35.08%, diluted earnings per share of 0.42 yuan/share, a 28.50% increase in product structure optimization, and rapid performance growth. With military business as its core, the company is a leading military high-end cable enterprise, and can provide completely independent full-link optical, electrical and thermal transmission solutions and products. The product line covers optoelectronic cables, optoelectronic components, photoelectric transmission components, FC optical fiber bus switching system node cards, cooling and cold plates, components and chassis, seawater desalination equipment, etc., mainly used in the five major military fields of aerospace, aviation, ships, electronics and weapons. Most of our customers are key enterprises and research institutes under the military industry group. In recent years, the product has changed from a single component to a system-integrated component. The structure has been optimized, downstream sales have been good, and performance has maintained a relatively rapid growth rate. Cable business: Based on customer resources and first-mover advantages accumulated over many years, steady growth has been maintained. In 2017, cable products achieved revenue of 231 million yuan, an increase of 6.03%; optoelectronics business: Downstream demand is strong. The company's newly developed optoelectronic products have been fully applied on various platforms such as airborne, shipborne, vehicle and electronic equipment, and has achieved batch equipment of optoelectronic transmission components and systems. In 2017, components and optoelectronic system products achieved revenue of 248 million yuan, an increase of 26.67%. Among them, optoelectronic integrated series products and FC optical fiber series products increased significantly and became the main growth point for the company's performance. The company's FC optical fiber bus switching technology has reached the advanced level in the field of next-generation high-speed data exchange in China. The new generation of optical fiber cables, optical connectors and components have been successfully developed and recognized by the market, and the technology and product performance are at the advanced level in China. Investment in R&D continues to increase, providing a guarantee for continued growth in performance. The company's R&D expenses continue to increase, and the share of R&D in revenue has increased from 8.81% in 2015 to 10.61% in 2017. In 2017, the company set up more than 30 projects, including special cables for ships, special optical cables, connectors, photoelectric transmission modules, optoelectronic transmission system products, and FC products for aerospace. Among them, component products passed 2 projects at the provincial ministry level. The company's research projects are commercialized and serialized according to equipment requirements, which is a potential growth point for the company's future performance. At the same time, technical reserves are made for the future development direction of the transmission field to ensure the use of equipment and ensure the company's technological advancement within the industry. The prospects for the military desalination equipment market are improving, and the subsidiary Changkang Environmental Protection has successfully fulfilled its performance promise. As the growth rate of military spending bottoms out and rebounds and the “maritime power” strategy continues to advance, demand for desalination equipment from downstream military customers continues to rise, and the prospects for the desalination equipment market are improving. Changkang Environmental Protection, a newly acquired subsidiary of the company, was officially merged in the second half of 2017. Changkang Environmental Protection is a leader in military seawater desalination equipment. In particular, it has obvious advantages in the field of reverse osmosis desalination equipment. It mainly supplies naval ships, and its product market share is high. In the long-term production process, Changkang Environmental Protection has fully mastered the process technology and core parameters of reverse osmosis seawater desalination devices for military ships, and innovated the technology for second-grade reverse osmosis seawater desalination devices. Currently, a new generation of second-stage reverse osmosis seawater desalination devices are in the formalization stage. In 2017, Changkang Environmental Protection achieved net profit of 596.796 million yuan attributable to shareholders of the parent company after deducting non-recurring profits and losses and deducting income-related VAT refunds of 59.6796 million yuan. The promised net profit for 2018 is 67 million yuan, which is expected to continue to contribute to the growth of the company's performance. The high-end civilian goods sector continues to expand, and performance contributions are worth looking forward to. Since its establishment, the company has always focused on military products, and the gradual development of high-end civilian goods business in recent years has been a beneficial complement to the company's business structure. In January 2017, the company invested 35 million yuan to establish a wholly-owned subsidiary, Nanjing Quanxin Rail Transit Equipment Technology Co., Ltd., to provide photoelectric transmission cables and components, power devices, electronic and electrical products, and on-board electronic equipment and systems for rail transit, new energy, and civil aviation. During the reporting period, the company's locomotive cable market expansion progressed steadily, and has successively reached strategic partnerships with mainframe manufacturers and locomotive suppliers under CRRC Group. Its self-developed data line products have been successfully applied in the “Ninghe Intercity” subway project, breaking through the current monopoly of imported brand data cables in the high-speed rail, urban rail, and subway markets, and realized the replacement of imported products. In addition, the company has also responded positively to the national “Belt and Road” strategy. Currently, it has passed civilian product certification such as AS9100C-2009 aerospace quality system certification approved by the international aviation industry, China Classification Society factory certification, and IRIS (International Railway Industry Standard) quality management system certification. Investment suggestions: We expect the company to achieve net profit of 171 million yuan, 221 million yuan, and 275 million yuan respectively in 2018-2020, corresponding to the current share capital of 313 million shares, and earnings per share of 0.55, 0.71, and 0.88 yuan/share, respectively. Since the company's main product business is the military industry as the core sector, has complete qualifications, a stable market base, and strong barriers, the diversified layout of civilian goods is progressing steadily, maintaining an increase in holdings rating. Risk warning: Product development progress falls short of expectations; diversified business development falls short of expectations; market competition intensifies.