On April 20, the company announced the 2017 annual report and the first quarter report of 2018. In 2017, the company achieved operating income of 1,318 billion yuan, an increase of 25.61% over the previous year, net profit attributable to the parent company of 132 million yuan, an increase of 11.84% over the same period last year, and a basic EPS of 0.30 yuan. Cash dividends of 0.50 yuan (tax included) are distributed for every 10 shares, and the share capital is not transferred from the Provident Fund. The company achieved operating income of 326 million yuan in the first quarter of '18, an increase of 29.48% over the previous year, and realized net profit attributable to the parent company of 18 million yuan, a decrease of 14.68% over the same period last year. Net profit for the first half of 2018 is estimated at 0.45 to 68 million yuan, a year-on-year change of -20% to 20%. The change in performance is mainly due to a large increase in R&D investment in the new energy drive motor business and uncertain off-season orders for new energy drive motors. Brief review of the advanced layout. The leading motor development market company has now completed the transformation to a first-class core component supplier in the field of energy saving and new energy vehicles, actively expanding the NEV drive motor and automobile motor markets, focusing on relevant business connections with key customers such as Yanfeng Andotuo, SAIC-GM-Wuling, SAIC Motor, Geely, Zotye, and Yuchai Co., Ltd., transitioning from traditional motor companies to integrated powertrain companies. In March 2018, the company plans to issue non-public shares for the production of flat wire motors and integrated drive systems. Through the development of products and applications with technical competitiveness such as flat copper wire motors and integrated drive systems, the company will become a leading new energy drive system enterprise in China. We believe that there is huge market space for integrated products and flat wire motor products, which will lead to high performance growth in the future. Customer value increased. Entering the Geely supply chain to ensure development In January of this year, the company signed a supply contract for the drive motor assembly procurement project with Zhejiang Yuanjing Auto Parts Co., Ltd., a subsidiary of Geely Holding Group, and entered Geely's electric vehicle motor supplier with its cost-effective product advantages. In addition to the original key customers such as SAIC-GM-Wuling, SAIC Motor, Geely, Zotye, and Yuchai Co., Ltd., the company's customer value will gradually increase, providing a strong guarantee for the company's product sales volume. Focus on innovation, gradually establish technological advantages, and the company invests no less than 4% of annual sales in R&D expenses every year, increase research and development of high-end passenger vehicle motors and electric drive integration, establish a research institute for electric drive systems and energy-saving motors for new energy vehicles, and focus on research and development of integrated systems for new energy vehicles. In September 2017, the company planned to raise an additional capital of 411 million yuan to increase production capacity (307 million) and technology research and development (104 million yuan). It will build 350,000 new energy vehicle motors and electric drive production capacity (200,000 motors+150,000 integrated electric drives) within 18 months to ensure investment in technology research and development. At present, the company has strong system design and integration capabilities. Its technical advantages are mainly reflected in the fields of electronic control of new energy drive motors, intelligent controllers, internal combustion engines, especially diesel engines, and the power and vehicle control of new energy vehicles. The company has a large share in the ECU and GCU markets, the industrialization of AMT automatic transmissions, and the domestic NEV powertrain and vehicle control system markets. Subsidies are in place to help future business activities Due to the “New Energy Vehicle Motor and Electric Drive Integrated System Project with an Annual Output of 350,000 Units”, the company received an investment subsidy of 46.56 million yuan from the central budget on March 26, which is conducive to improving the company's financial situation and business activities. It is estimated that the company's EPS for 2018-2019 will be 0.40 yuan and 0.51 yuan respectively, and the corresponding PE will be 22 and 17 times, respectively, maintaining the “buy” rating, and the corresponding target price is 12.35 yuan. Risk warning: 1) The risk of raw material price fluctuations; 2) product marketing falls short of expectations; 3) industry development falls short of expectations.