Event: The company released its report for the third quarter of 2018. Net profit attributable to owners of the parent company for the first three quarters was 125 million yuan, up 1.32% year on year; operating income was 495 million yuan, up 5.32% year on year; and basic earnings per share was 0.3989 yuan, down 7.77% year on year. The company's performance was stable, and there was a decline in Q3 results in a single quarter. The company achieved operating income of 495 million yuan in the first three quarters of 2018, an increase of 5.32% over the previous year; net profit was 125 million yuan, an increase of 1.32% over the previous year. Mainly because the company continues to expand the market, the scale of business is growing steadily. During the reporting period, since the subsidiary Changkang Environmental Protection was affected by external environmental and market factors, the company's Q3 quarter operating income was 179 million yuan, a decrease of 8.47% over the previous year; the net profit of the company was 653.466 million yuan, an increase of 9.79% over the previous year. The increase in net profit was mainly due to the company's effective cost control and increased gross margin. Leading military high-end cable company, product structure optimization. With military business as its core, the company is a leading military high-end cable enterprise, and can provide completely independent full-link optical, electrical and thermal transmission solutions and products. The product line covers optoelectronic cables, optoelectronic components, photoelectric transmission components, FC optical fiber bus switching system node cards, cooling and cold plates, components and chassis, seawater desalination equipment, etc., mainly used in the five major military fields of aerospace, aviation, ships, electronics and weapons. Most of our customers are key enterprises and research institutes under the military industry group. In recent years, products have changed from single components to system-integrated components. The product lineage is becoming more and more complete, the structure continues to be optimized, downstream sales are good, and performance has maintained steady growth. The prospects for the military desalination equipment market are improving, and the merger and acquisition of Changkang Environmental Protection was successfully completed. As the growth rate of military spending bottoms out and rebounds and the “maritime power” strategy continues to advance, demand for desalination equipment from downstream military customers continues to rise, and the prospects for the desalination equipment market are improving. The company completed the acquisition of Changkang Environmental Protection in the first half of 2017. Changkang Environmental Protection is a leader in military seawater desalination equipment. In particular, it has obvious advantages in the field of reverse osmosis desalination equipment. It mainly supplies navy ships, and its product market share is high. In the long-term production process, Changkang Environmental Protection has fully mastered the process technology and core parameters of reverse osmosis seawater desalination devices for military ships, and innovated the technology for second-grade reverse osmosis seawater desalination devices. Currently, a new generation of second-stage reverse osmosis seawater desalination devices are in the formalization stage. The high-end civilian goods sector continues to expand, and performance contributions are worth looking forward to. Since its establishment, the company has always focused on military products, and the gradual development of high-end civilian goods business in recent years has been a beneficial complement to the company's business structure. In January 2017, the company invested 35 million yuan to establish a wholly-owned subsidiary, Nanjing Quanxin Rail Transit Equipment Technology Co., Ltd., to provide photoelectric transmission cables and components, power devices, electronic and electrical products, and on-board electronic equipment and systems for rail transit, new energy, and civil aviation. The company's locomotive cable market expansion is progressing steadily, and it has successively reached strategic partnerships with mainframe manufacturers and locomotive suppliers under CRRC Group. Its self-developed data line products have been successfully applied in the “Ninghe Intercity” subway project, breaking through the current monopoly of imported brand data cables in the high-speed rail, urban rail, and subway markets, and realized the replacement of imported products. In addition, the company has also responded positively to the national “Belt and Road” strategy. Currently, it has passed civilian product certification such as AS9100C-2009 aerospace quality system certification approved by the international aviation industry, China Classification Society factory certification, and IRIS (International Railway Industry Standard) quality management system certification. Investment suggestions: We expect the company to achieve net profit of 171 million yuan, 221 million yuan, and 275 million yuan respectively in 2018-2020, corresponding to the current share capital of 313 million shares, and earnings per share of 0.55, 0.71, and 0.88 yuan/share, respectively. Since the company's main product business is the military industry as the core sector, has complete qualifications, a stable market base, and strong barriers, the diversified layout of civilian goods is progressing steadily, maintaining an increase in holdings rating. Risk warning: Product development progress falls short of expectations; diversified business development falls short of expectations; market competition intensifies.