The results for the first quarter of 2017 and 2018 are in line with expectations Jiangsu Cathay Pacific announced 2017 and 1Q2018 results: 2017 operating income of 34.489 billion yuan, up 16.1% year on year; attributable net profit of 774 million yuan, up 43.2% year on year, corresponding to earnings per share of 0.49 yuan. 1Q2018's revenue was 7.583 billion yuan, up 5.8% year on year; attributable net profit of 228 million yuan, up 48.1% year on year, corresponding to earnings per share of 0.14 yuan. 2017 and 1Q2018 results were in line with expectations. The company predicts that net profit attributable to 1H18 will be 40,562.45 to 516.2493 million yuan, an increase of 10% to 40% over the previous year. The development trend is to build a 40,000 tons/year electrolyte project in Poland to connect with the European market. At the end of 2017, the company announced that its wholly-owned subsidiary Ruitai New Energy and its holding subsidiary Huarong Chemical will each invest 50% to establish a Polish company in Poland and invest 300 million yuan to implement the 40,000 tons/year lithium-ion battery electrolyte project, which is expected to be completed and put into operation in mid-2020. Customers of Huarong Chemical's downstream battery companies, such as South Korea, plan to build factories in Europe. Building a factory in Poland will facilitate business collaboration with relevant customers, meet customer needs in a timely manner, reduce production costs, and explore the European market. The company expects the annual profit after tax of the project to reach 317.584 million yuan after delivery. It is expected that the price of the company's electrolyte will drop this year, and sales will grow rapidly. The company is one of the leading lithium battery electrolyte companies. With declining subsidies and technological development, we expect the company's electrolyte price trend to decline this year. Meanwhile, the development of the downstream NEV market will drive an increase in electrolyte demand and drive the company's electrolyte sales to grow rapidly. CICC Motor Group expects sales of new energy vehicles to reach 1.1 million units in 2018, an increase of 42% over the previous year. Promote textile and garment supply chain services and focus on the impact of exchange rate fluctuations on performance. The company has established multiple supply bases in Myanmar, Cambodia and other places through self-construction and cooperation, which helps the company build a global supply chain and helps the company grow into a first-class international integrated trading company. In 2017, the company's total annual import and export volume was US$3965.95 million, an increase of 11.8% over the previous year. The company's main business developed steadily, but import and export trade was greatly affected by exchange rate fluctuations. Net profit of 10.26 million yuan after deduction in 1Q18 was 10.26 million yuan, a year-on-year decrease of 93.3%. Earnings Forecast We have maintained our 2018 earnings forecast of 0.61 yuan per share and introduced a 2019 earnings forecast of 0.73 yuan per share. Valuation and recommendations The company's current stock price corresponds to 12/10 times P/E in 18/19. Maintaining the recommended rating and target price of 13.08 yuan, corresponding to 22/18 times P/E in 18/19, there is 78% room compared to the current stock price. Risk: The NEV market is weak, electrolyte prices have dropped sharply, and exchange rates have changed drastically.