Key investment performance is in line with market expectations, and the gross margin of the NEV business is under pressure. The company released its 2018 semi-annual report, with revenue of 1,810 billion yuan (+6.71% year-on-year) and net profit of 111 million yuan (-23.60% year-on-year) for the first half of 2018. Among the main business, motors used for air conditioning accounted for 42.78%, achieving revenue of 3.486 billion yuan (-2.01% yoy); non-air conditioning motors revenue was 713 million yuan (+24.26% yoy), up 2.36 pcTS to 16.84%; starters and generators accounted for 24.06%, achieving revenue of 1,018 billion yuan (-0.93% yoy); powertrains for new energy vehicles accounted for 10.20%, achieving revenue of 432 million yuan (+59.08% yoy). The comprehensive gross profit margin was 17.65% (y-1.94 PCts), of which the gross profit margin of the new energy power system was 16.67% (-3.27 pcTS). The growth rate of the home appliance business has slowed, and the added value of products has increased. The first half of the year was affected by multiple factors such as the rapidly growing overdraft demand in 2017, real estate purchase restriction policies, and raw material prices. The home appliance business experienced a marked decline in year-on-year growth, achieving main business revenue of 2,524 billion yuan, an increase of 2.40% over the previous year. The company's HM division has made positive progress in the development of new products such as automotive air conditioning fans, induction fans, and their controllers. Through product structure optimization, product added value has been increased. While the production and sales volume of the HM division was basically the same as in the same period last year, revenue increased slightly. The new energy powertrain business is growing rapidly, and 48V products complete the NEV business layout. In the first half of 2018, starter and generator revenue was 1,018 million yuan (-0.93%), and new energy vehicle powertrain system revenue was 432 million yuan (+59.08%). In terms of pure electric products, products such as “2 in 1” and “3 in 1” have been introduced to automakers. In terms of hybrid products, products related to dual motors have been developed. In addition, the company has strengthened the development and layout of 48V BSG systems. Production lines with an annual output of 500,000 sets of 48V BSG systems have also been completed, continuing to expand customer markets such as Weichai, Yuchai, Cummins, Yunnei Power, Jianghuai, Geely, and GAC. At present, the company has entered supplier systems such as SAIC Roewe and Great Wall Motor, and has received orders from new Internet car builders such as Yundu and Electric Coffee. Join hands with leaders in hydrogen storage technology to actively explore the hydrogen fuel cell market. At the beginning of 2018, Ocean Electric signed an “Investment Agreement” with Hydrogenious Technologies GmbH, one of the world's leaders in hydrogen storage and transportation technology, and plans to introduce the company's LOHC hydrogen storage system and test and use it domestically. The technology has high hydrogen storage efficiency, non-toxic, and liquid conditions at room temperature and pressure, which is conducive to significantly reducing hydrogen storage and transportation costs. The company will further strengthen cooperation with Ballard, develop new hydrogen fuel cell products, and actively explore the hydrogen fuel cell market. Supporting customers include Dongfeng Special Vehicle, Zhongtong Bus, Foton Bus, Foshan Feichi, Xiaolan Bus, etc., and is expected to begin batch supply in the second half of this year. risk factors. 1. Major adjustments in the NEV industry policy; 2. The company's business development results did not meet expectations. Profit forecasts and valuations. The company's home appliance business was affected by multiple factors such as the rapidly growing overdraft demand in 2017, real estate purchase restriction policies, and raw material prices. Revenue and profit were under great pressure. The powertrain business revenue grew rapidly but gross margin was under heavy pressure. The company's 2018/19 EPS forecast was lowered to 0.21/0.26/0.35 yuan (the original forecast was 0.25/0.32/0.42 yuan). The current stock price corresponding to 2018/19/20 PE is 21/17/13 times, respectively. It is expected that sales of new energy vehicles will continue to grow at a high rate, driven by various models in the second half of the year. It is optimistic that the company's comprehensive layout in the field of new energy vehicle powertrains, weak mixing, pure electric power, and fuel cell technology routes are complete, benefiting from the automobile electrification wave in the long term. We are optimistic about the further results of the company's multi-platform strategy and maintaining the “buy” rating. The target price is 6.5 yuan, which is 31 times the PE in 2018.