Report guide The company released its 2018 quarterly report on April 24. The automobile wheel project is steadily advancing key investment points, and the domestic steel structure business has been greatly expanded. The operating income exceeded expectations. In the first quarter of 2018, the company's revenue scale exceeded expectations, and the number of orders continued to rise. According to the report for the first quarter of 2018, the company achieved operating income of 636 million yuan, up 83.72% year on year. On the one hand, the domestic market increased dramatically, especially the steel structure market continued to improve; on the other hand, the steel wheel business in foreign markets had sufficient orders and continued to maintain a rapid growth trend, and the company's revenue side continued to improve. Due to large exchange losses, financial expenses in the first quarter increased by 11 million yuan, which had a significant impact on the company's net profit. The net profit attributable to shareholders of listed companies in the first quarter of 2018 was 9.5622 million yuan, up 22.14% year on year, lower than the growth rate of operating income. Profitability is expected to improve as exchange rate risk management and control capabilities improve. We have rich experience in steel structures, and the domestic equipment and steel structure business continues to improve (1) Rich overseas experience, laying a technical foundation. The company is located in the core area of the Belt and Road. It occupies the advantages of the Haixi Economic Zone and focuses on developing high-end steel structure business. The company has rich industry experience and obvious advantages. Overseas equipment and steel structure project contracts currently being implemented include: Zhongding/Horse Oil RAPID-P1 project, Fulu and Deshinib Consortium/Horse Oil RAPID-P14 project, Sinopec SEG/Horse Oil RAPID-P2 project, Technymount and China Petroleum Global Alliance/Malaysia Oil RAPID-P7 project, US CB&I and Taiwan Zhongding Union/Oman LIWA project, Japan's JGC/Algeria project, Japan's Mitsubishi Hitachi/Hitachinaka Power Plant Project, Techny Mount and Sinopec Global Coalition/Malaysia Oil RAPID-P27 project, Fulu/Malaysia Oil RAPID-P29 project, Mitsubishi and Yuanda consortium/Indonesia seawater desulfurization project, Fulu JG SUMMIT project, etc. (2) Continued release of steel structures for domestic equipment. Steel structure orders for key domestic engineering projects have increased dramatically, especially for large-scale industrial electronics plants and cloud rail transit projects. Major undertakings include Nanjing TSMC semiconductor project, Chengdu Jingdong, Chengdu Panda Electronics, Mianyang Jingdong, Guangzhou LG, Guangzhou Foxconn, Xi'an Samsung, Fujian Ningde New Energy EV project, BYD Yinchuan/Guang'an Cloud Rail project, Xiamen Software Park high-rise building, Nanning International Convention and Exhibition Center, Chongqing Banan Stadium, Nanchong Museum, etc., with significant business growth and stable industry position. In the future, with the continuous expansion of the domestic equipment steel structure market, the company is expected to continue to gain strength with its technological advantages. The automobile wheel project is progressing steadily, the market prospects for the new project are broad, and investment in this phase has increased dramatically, and the Huaan wheel project is progressing in an orderly manner. The company established a new Nissho Forging Company to expand the wheel hub project. It plans to invest RMB 1 billion and invest RMB 250 million in the first phase. At present, the project has completed the first phase of major production plant construction, equipment installation and commissioning, and trial production. The company's steel structures, tubeless lightweight load steel wheels, and aluminum alloy forged wheel products are all green, energy-saving and environmentally friendly products, and are encouraged by the national industrial policy for development. According to industry forecasts, the average growth rate of domestic aluminum alloy wheels will reach 50-80% in the next 3-5 years. Domestic buses and special dangerous goods vehicles are now equipped with a large number of forged aluminum wheels. As automotive wheel materials move in the direction of weight reduction, resource saving, high performance and high functionality, the market prospects for new investment projects are broad. Smart wheels help wheel sales, and R&D accumulation advantages gradually reflect the company's active deployment of high-quality strategic projects in the automotive aftermarket and emerging IoT industries. A vertical wheel ecosystem platform combining TPMS, GPS, Beidou, ultrasonic fuel level sensors, RFID, laser tread detectors, etc. has been built and promoted, and a complete technical service system for various user solutions such as wheel manufacturers, dealers, stores, and fleets has been formed. The expansion of software and hardware R&D and production scale has solved the pain points of test data collection and greatly promoted the research and development of innovative smart wheel technology. The diversification of cooperation models with tire manufacturers, car manufacturers, fleets, and tire service providers has also effectively expanded the barrier advantages of the product sales channel industry. Profit forecast and valuation We expect the company to achieve revenue of 26.80, 31.80, and 3.734 billion yuan in 2018-2020, a year-on-year increase of 34.63%, 18.64%, and 17.42%, and achieve net profit attributable to the parent company of 0.883, 1.067 and 133.3 million yuan, up 30.20%, 20.78% and 24.96% year on year; the EPS for 2018-2020 is 0.13, 0.15, and 0.19 yuan respectively, corresponding to the latest stock price, the PE of 30.16, 24.97, 19.98 times. Since the company is located in the core area of the Belt and Road, and has the advantage of the Haixi Economic Zone, overseas revenue has been rising steadily, while steel structures in the domestic market are developing well. Be optimistic about the company's development and maintain a “buy” rating.