Matters: On April 26, 2018, the company successively released the 2017 annual report and the 2018 quarterly report. Total operating income for the full year of 2017 was 4,232 billion yuan, an increase of 2.14% over the same period in 2016; net profit attributable to shareholders of listed companies was 595 million yuan, an increase of 10.4% over the same period in 2016. The first quarter of 2018 achieved total operating income of 1.09 billion yuan, an increase of 22.53% over the same period in 2017; net profit of the mother was 154 million yuan, an increase of 75.22% over the same period in 2017. Comment: Overall performance was in line with expectations. The company's operating income and net profit in 2017 were 4,232 million yuan and 595 million yuan respectively, up 2.14% and 10.4% year-on-year respectively. (1) Light bar production increased, and fourth quarter results began to be released: In the fourth quarter, due to the gradual release of light bar production capacity, the growth rate was higher than the annual average. The net profit for the single quarter was 170 million yuan, an increase of 15.2% over the previous year. (2) Decline in the communications equipment and cable business: Communications equipment business fell 45.9% year on year and gross profit fell 7.52% year on year, mainly due to changes in ODN procurement methods, while the cable portion was down 29.5% year on year, gross profit fell 1.66% year on year due to factors such as raw material price increases and demand side, and the total revenue of the two businesses fell by 712 million yuan, which greatly hampered performance. Lightbar's self-sufficiency rate has increased, and performance has improved. Thanks to the increase in the self-sufficiency rate of optical fiber prefabricated rods, the stabilization of the supply of optical rods from strategic partners, and Baizhuo Network's information security business grew rapidly after completing a wholly-owned acquisition. The company's revenue and net profit for the first quarter of 2018 were 1.09 billion yuan and 150 million yuan respectively, up 22.5% and 75.2% year on year. At the same time, the company also predicts net profit attributable to shareholders of listed companies from January to June 2018 of 380-464 million yuan, an increase of 35%-65% over the previous year, and the company achieved rapid growth. At the same time, the company's other businesses have gradually stabilized, driving a steady increase in the company's performance. Optical fiber cables will continue to be popular in 2018, and optical bars will no longer be a bottleneck. (1) The optical cable industry is expected to reach a growth rate of 27% in 2018: Mobile carried out fiber-optic cable collection in 2018, with a tender volume of about 110 million core kilometers. Judging from the previous demand survey, the amount of optical cables collected by the three major operators is expected to reach 291 million core kilometers, and the total demand is expected to exceed 340 million core kilometers, an increase of 27% over the previous year. The supply of fiber-optic cables will continue to be in short supply in 2018. (2) The bottleneck of the company's light rod has been solved: the company started a new production of 300 tons of light bars in 2018, and its own production reached 400 tons. At the same time, a long-term strategic cooperation agreement was signed with Hainan Corning. The supply volume is expected to be 450-500 tons, and the production of its own+Corning's light bars is close to 850-900 tons. Optical bar production will no longer be a bottleneck. Optical fiber cable performance is expected to be further unleashed in 2018 under both strong supply and demand scenarios. Driven by multiple engines, network information security is expected to become another pole in the company's growth. After the company's new management was put in place, the business direction was adjusted positively. On the one hand, long-term equity investments that are not highly relevant to the business are gradually sold at reasonable premiums, such as the sale of 6% equity investment from Hangzhou Shuyun Information Technology Co., Ltd. in this period; on the other hand, increased investment in network information security software, switches, SDN, etc., in an effort to transform from a cable company to a comprehensive solution provider. After the merger and acquisition of Beijing Baizhuo Network in 2018, customer synergy was obvious, bringing new profit growth points to the company. The traffic and data management sector has also achieved high growth. We believe that as the share of high-margin new businesses increases further, the company's performance will also perform well. Gross margin has increased, and the company's operations have been steady. The gross profit margin of the company's main business in 2017 was 30.8%, an increase of 1.1 percentage points over the previous year. Optical fiber cables benefited from the release of optical rod production capacity, with a gross profit margin of 29.7%, an increase of 2.1 percentage points; Baizhuo's new mergers and acquisitions reached 58.9%, higher than the company's other businesses. With the rapid growth of Baizhuo's business, there is room for further improvement in gross margin. Furthermore, the company's balance ratio fell from 55.32% to 46.18%, the current ratio increased from 1.13 to 1.29, and the speed ratio increased from 0.86 to 0.98, further stabilizing operations. Risk factors: Follow-up demand for optical fiber cables falls short of expectations, progress in expanding optical rod production falls short of expectations, and business development of acquired subsidiaries falls short of expectations. Profit forecast, valuation and investment rating: In 2018, supply and demand for fiber optic cables were tight, and business prosperity can be expected. At the same time, new businesses such as Baizhuo currently have a good synergy effect. We slightly adjusted the company's EPS forecast for 2018-20 to 0.63/0.67/0.76 yuan (the original forecast was 0.61/0.70 for 2018-19), corresponding to PE21/20/18X, and maintained the “increase in holdings” rating.