The 2017 results are in line with the Performance Report Dinghan Technology announced 2017 results: operating income of 1.24 billion yuan, an increase of 29.6% year on year; net profit belonging to the parent company was 74 million yuan, down 33.7% year on year, in line with the performance report. The overall gross margin has declined, and the gross margin of information technology products has risen. The overall gross margin for 2017 was 34.8%, down 4.1ppt from the previous year, mainly due to a decrease in the share of revenue from high-margin vehicle cable products, and an increase in depreciation and amortization due to the transformation of construction projects and the conversion of R&D capitalization projects. The gross margin of informatization and safety monitoring products was 51.4%, an increase of 19.2ppt over the previous year, showing initial synergy effects. Management costs have been optimized, and R&D investment has been strengthened. The company invested 99 million yuan in R&D, an increase of 33.5% over the previous year. The management cost rate was 12.7%, achieving a year-on-year decrease of 3.8 ppt under high R&D investment, and the efficiency improvement was significant. The sales expense ratio was 14.3%, an increase of 1.3 ppt over the previous year, in line with the growth rate of new orders. The financial expense ratio was 3.8%, an increase of 0.6ppt over the previous year, mainly due to increased borrowing. The development trend is that the completion mileage of China Railway has rebounded, and the urban rail boom has remained strong. We expect railway completion mileage to increase by 45%/34%/35% year-on-year in 2018/19/20; demand for additional trains will be added in 2018 to 350 to 400, 900 locomotives, and the subway delivery growth rate is expected to reach 15 to 20%. Along with the expected normalization of EMU tenders, the company's 18-year performance is expected to pick up. Four-phase equity incentives help improve performance. The company implemented the fourth phase of the equity incentive plan. The operating conditions for 18/19/20 were that net profit to mother was greater than $2/2.4/280 million, which was moderately difficult, fully mobilized management and employee motivation, and demonstrated the company's confidence in future performance. There are plenty of orders on hand, and 18-year performance can be expected. In '17, the company received 1.94 billion yuan in new orders, an increase of 118.7%; at the end of '17, the company had pending orders of 2.06 billion yuan, an increase of 43.6% over the previous year, a record high, providing a guarantee for 2018 results. Profit forecast We maintain our 2018/19e profit forecast of 0.48/0.51 yuan unchanged. Valuation and recommendations The company's current stock price corresponds to 19.4/17.9 times P/E in 18/19, maintaining the recommended rating. Considering the downward shift in the industry's valuation center, we lowered our target price from 14.26 yuan to 11.89 yuan, corresponding to 25/23 times P/E in 18/19, with 28.8% room compared to the current stock price. The tender for the risky vehicle fell short of expectations.