Event: On the evening of June 19, 2018, the company released the 2018 Restricted Stock Incentive Plan (draft). The incentive plan unlocks conditions that deduct issuance fees and profits at a high rate of profit, which is conducive to improving the long-term incentive mechanism and promoting the long-term development of the company. According to the “Draft”, the current incentive plan plans to grant a limited number of shares of 6.16 million shares (accounting for 6.16% of the total share capital). The plan is to grant a total of 96 people, including directors, middle and middle executives, and employees directly affecting the company's development. The planned grant price is 20.35 yuan/share (5.8% off the closing price on June 19). This incentive plan is locked for one year, then unlocked in three phases (40%/40%/20%, respectively). The corresponding unlocking conditions are that the net profit growth rate after deduction of share payment expenses in 18/19/20 is not less than 15%/25%/35% on the basis of net profit in 2017. The implementation of this restricted stock incentive plan will further establish and improve the company's long-term incentive mechanism, attract and retain talents, bind employees' personal interests with the company's interests, and promote the long-term development of the company. Benefiting from the deepening of military reforms, the improvement of combat capability, and the improvement of defense capabilities such as maritime rights protection, the company ushered in a period of major development opportunities. According to the company's 2017 annual report, the company focuses on the field of ship supporting electrical and automation systems, and has become one of the main suppliers of ship electrical and automation systems to government departments and agencies such as the State Oceanic Administration, China Maritime Administration, China Fisheries Administration, Waterways Administration, and the Chinese People's Liberation Army Navy. The company's overall strength is in a leading position in the production of related marine ancillary equipment such as ship electricity and automation systems, especially in the field of national defense and military use. The company has a complete range of military qualifications, such as a national second-level confidential qualification certificate. As a designated supplier for the Chinese Navy, the products have been applied to various mainstream ships of the Chinese Navy, and the transformation from supplying a single product to providing system solutions has been realized. According to the company's 2017 annual report, domestic demand for military ships and official law enforcement vessels is stable. With the development of China's economy, the development of overseas investment and trade, and the introduction of the National Maritime Power Strategy, the transformation of military strategy to “offshore defense, offshore protection” has accelerated, the number of large ships in service has increased, and the demand for military auxiliary ships has also increased markedly. At the same time, a number of ships built in the 90s of the last century have also reached the renewal period. China's official law enforcement ship market is currently basically in the stage of being upgraded one after another, and there is a clear trend of large-scale expansion. Various coastal cities are also being equipped with maritime surveillance ships, patrol boats, etc., and will usher in a decade of rapid development. In addition, special ships will also form new growth points. In the future, with the deepening of military reform, the improvement of combat capability, and the improvement of defense capabilities such as maritime rights protection, the company will usher in new major development opportunities. We attach great importance to R&D to maintain core competitiveness. According to the 2017 annual report, in order to guarantee and enhance continuous innovation capabilities in the fields of marine electricity, automation, etc., the company attaches importance to the construction of its own technology research and development system while continuously strengthening cooperation with external scientific research institutions, forming complementary advantages with the company's R&D department, and promoting the improvement of the company's technical level. In addition, the marine electrical equipment provided by the company is non-standard equipment. Product design and development capabilities and ability to provide customers with technical solutions are particularly important. In 2017, the company invested 6.86% of R&D expenses, and continued to maintain strong technological innovation vitality and product design and development capabilities. Continuously build and optimize management systems to attract outstanding talents. According to the 2017 annual report, while the scale of operations continues to expand, the company is strengthening the construction and optimization of the company's management system. In 2017, the company used the issuance and listing as an opportunity to attract a number of outstanding management and technical talents to join the company, achieving an overall improvement in the company's overall competitiveness. In the future, the company will continue to improve incentives and restraint mechanisms such as quality management, performance management, and remuneration management to form a professional management system. At the same time, it will also adhere to the guidelines of combining internal training with external introduction in accordance with development plans and new project construction requirements, and take training and attracting outstanding technical personnel as the core talent strategy to optimize the professional structure of existing employees. Profit forecasts and investment advice. The company's 2018-2020 EPS is estimated to be 1.33, 1.68, and 2.11 yuan respectively. Combined with the valuation of comparable companies, we gave the company 30-40 times PE in 2018, with a target price of 39.90-53.20 yuan, a “superior to the market” rating. Risk warning. (1) Military orders fluctuated, and (2) new product development fell short of expectations.