The 2017 results fell short of expectations, and Yinfei Storage announced 2017 results: operating income of 60 billion yuan, up 22% year on year; net profit belonging to the parent company was 80 million yuan, up 1.4% year on year, corresponding to profit of 0.27 yuan per share. Net profit after deducting non-return to mother was 60 million yuan, down 23% year on year, and performance was lower than expected. The main reason is that steel accounts for a high share of operating costs. The overall average price of steel rose by 42.4% in 2017, leading to an increase in operating costs and a decrease in gross profit. Shelf business orders grew rapidly, and gross profit was greatly affected by steel price increases: general shelf revenue increased by 15%, gross margin decreased by 5.5ppt, specialty shelf revenue decreased by 30%, gross margin decreased by 4.4ppt, loft shelf revenue increased 48%, gross margin decreased by 12.2ppt, and the overall gross profit share of the three shelf businesses decreased by 3.9 ppt to 58.1%. The gross margin of automation system integration is stable and growing rapidly: In 2017, automation system integration revenue increased by 20%, and gross margin decreased slightly by 1.4ppt. As a strategic business of the company, it will gradually become a new profit point. Development trends Refined management and personalized operation may achieve the sustainable development of the shelf business: In 2017, the company greatly improved the level of intelligence and informatization of shelf production, reduced the error rate, improved efficiency per capita, and consolidated its leading position in the shelf field. The strategic transformation of the warehousing operation business continues to advance: 1) The company signed a Cainiao maintenance service project and Vipshop signed an automated service contract; 2) Jointly invested with Logos to build a meat inspection site project in Hangzhou, with a registered capital of 23 million US dollars, and Yinfei Storage pledged 15%. Looking ahead, the project will be carried out using the model of asset-heavy investment (joint venture, Yinfei accounts for 15%, leasing equipment to asset-light companies), and operated by asset-light companies (Yinfei Holdings, charging according to business volume). It will be put into use in the second half of 2018. Although the impact on short-term profits is limited, it will lay a good foundation for the company's strategic transformation. The profit forecast was lowered by 6%/8% to the 2018/19 profit forecast to 1.07 billion yuan. The corresponding net profit growth rate was 28%/5%, respectively. Valuation and recommendations The company's current stock price corresponds to 31.7/30.2 times P/E in 18/19. We maintain a neutral rating and target price of 11.90 yuan, and the target price corresponds to 33.8 times the 2018 P/E. Currently, there is still room for 6.5% increase in the stock price from the target price. Risk: The macroeconomy has stalled, and steel prices have risen.