The 3Q18 results were in line with expectations, and Dayang Electric announced 3Q18 results: revenue for the third quarter was 2,070 billion yuan, up 3.11% year on year; net profit attributable to parent company was 34 million yuan, down 50.34% year on year; net profit after deducting non-payment increased 2.76% year on year. The company's performance is in line with the 1-3 quarter results forecast. Development trends There are various types of businesses and different operating models. The company has both traditional motor businesses such as new energy electric drives and start-stop motors, and is also simultaneously developing emerging businesses such as new energy vehicle operation platforms and fuel cells. Multi-line investment is difficult to focus on, and the resources and enterprise genes required for manufacturing and platform operation are not the same. There is limited synergy between travel platforms and other main businesses. Since 2014, the company has proposed a new energy vehicle operation platform to promote new energy vehicles by holding shares in passenger transportation, logistics, charging and other companies. We think it is difficult to start with a pure manufacturing platform. Take Global Auto Share as an example. As of June 20, 2018, Global Car Sharing covered about 63 cities, 13,000+ outlets, 32,000 operating vehicles, and has also developed technologies such as intelligent parking space management and smart vehicles. If Taiyang needs to become a leading company in the new energy operating platform, it may need to continue to invest on a large scale, and it will not be profitable in the short term. The main business is not focused enough. BAIC New Energy, one of Taiyo Electric's main customers, has jointly developed high-efficiency electric drive systems with Siemens and other international competitors. There is a risk that major customers will be lost in the long run; the main customers of electric drives are small pure electric models such as Chery and Zhidou, and the company needs to break through to high-end models. The fuel cell business may be dragged down during the growth period. Fuel cells still have problems that need to be overcome on the road to industrialization, such as the high cost of a single unit and demanding environmental requirements. We are optimistic about the development prospects of fuel cells for a long time, but they will still be a drag on the company until large-scale production is carried out. Profit forecast Due to concerns about medium- to long-term profits, we lowered our 2018/19e profit forecast by 12.2%/27.4% to $3.21/341 million. Valuation and recommendations The company's current stock price corresponds to 25.3/23.8 times P/E in 18/19, maintaining the recommended rating. Due to the downgraded profit forecast, we lowered the target price by 11% to 4.7 yuan, and the target price corresponding to 33.6/33.6 times P/E in 18/19. Compared with the current stock price, there is room for 37% increase. Risk The downside risk brought about by new energy vehicles falling short of expectations; the upward risk brought about by high-end matching models.