As a core supplier of ship electrical and automation systems, the performance in the first half of the year fell slightly. The company's 2018 H1 revenue was 210 million yuan, down 10.48% year on year; net profit was 576.87 million yuan, down 1.03% year on year, and gross profit margin was 47.28%, down 3.5% year on year. Basically the same period last year, and performance was in line with expectations. From the perspective of national defense and security, strategic requirements, and the development of naval equipment, we believe that China's navy will continue to maintain a high investment in construction in the future. With the implementation of the civil-military integration policy, the company's future military performance is expected to rise. In the field of civil shipping, the company also has strong competitiveness compared to domestic enterprises, and is expected to benefit from the continuous promotion of the autonomous policy of supporting civil ships in the future. We expect the company's 2018-2020 EPS to be 0.86/1.03/1.42 yuan, maintaining the company's “buy” rating. The shipbuilding market is showing an upward trend. The civilian goods business is expected to benefit from the recovery of the ship market and the promotion of localization policies. According to the company's semi-annual report, the country completed shipbuilding of 18.86 million DWT in the first half of the year, a year-on-year decrease of 28.9%; undertook orders for new ships of 22.7 million DWT, an increase of 97.2% over the previous year; by the end of June, orders for hand-held ships were 91.07 million dwt, up 9.9% year on year. The sharp increase in new orders indicates that future market conditions are promising, and the ship market is showing initial signs of recovery. Ruite Co., Ltd. is a well-known domestic enterprise in the field of marine electrical and automation support. Compared with many other small and medium-sized private enterprises, it has high brand awareness, strong technology research and development and independent innovation capabilities in the industry, and has a wide range of product applications. In the future, as the civil shipping market picks up and the civil ship support localization policy progresses, the company's civilian goods business is expected to benefit. Naval equipment continues to develop, and the warship support business is expected to continue to rise in the future. Considering the multiple needs of future naval equipment development, aircraft carrier formation construction, and replacement of old ships in service, we believe that the rapid, high-quality development of the navy will continue for three to five years, and investment in naval equipment construction is also expected to remain high. The military ship electrical and automation system supporting industry barriers are high. The company is a core supplier of electrical and automation systems for naval ships. It has the dual advantages of leading technology and civil-military integration in the industry. It is expected to benefit from continued high investment in naval equipment construction in the future. Furthermore, as a high-quality civilian military enterprise, the company will also benefit from the continuous advancement of the civil-military integration policy in the future. The performance is in line with expectations. Maintaining the “buy” rating benefits from the continuous development of naval equipment, the civil-military integration policy, and the continuous advancement of the civilian ship support policy. The company's military and civilian performance is expected to continue to rise in the future. Considering that the company will implement an equity incentive plan in the future, it is necessary to deduct 2264.7/3736.72/135881 million yuan of equity incentive expenses in 2018-2020. It is estimated that the 2018-2020 revenue of Ruite Co., Ltd. is 560 million yuan, 733 million yuan, and 921 million yuan, respectively, and net profit of 1.37/1.65/227 million yuan (previous value: 1.57/1.99/241 million yuan), corresponding to EPS of 0.86 yuan, 1.03 yuan, and 1.42 yuan respectively. Comparable companies had an average P/E valuation of 23.66 in 2018, which gave Ruite Co., Ltd. 23-27 times the P/E valuation in 2018. The target price range was 19.71-23.13 yuan/share, maintaining a “buy” rating. Risk warning: The increase in military spending and the advancement of civil-military integration policies fell short of expectations; the promotion of civilian ship recovery and civilian ship support and autonomy policies fell short of expectations.