The results for the third quarter of 2018 were in line with expectations. The company announced the results for the first three quarters of 2018: operating income of 29.871 billion yuan, up 15.35% year on year; net profit attributable to the parent company was 1,415 billion yuan, up 28.03% year on year, corresponding to earnings of 0.06 yuan per share. Net profit after deducting non-return to the mother was 1,280 million yuan, reversing losses over the same period last year. Reduce costs and increase efficiency to continuously improve profitability. The company's military business is progressing steadily, and civil shipping orders have continued to grow. Revenue in the first three quarters increased 15.35% year-on-year, but the gross margin was YOY-1.19ppt to 10.35%. We judge that it was mainly affected by rising steel prices. It is worth noting that the company reduced costs and increased efficiency significantly and increased profitability, with management expenses reduced by 67 million yuan over the same period last year; financial expenses of 408 million yuan and net financial income increased by 372 million yuan, mainly due to the implementation of debt-for-equity swaps and exchange earnings from the appreciation of the US dollar; and the year-on-year increase in sales expenses of 78 million yuan was mainly due to an increase in product warranty costs. Asset impairment losses decreased by 955 million yuan year-on-year, mainly due to preparations for lower inventory prices for offshore projects in the same period last year. The net profit margin for the first three quarters was 4.74%, YOY+0.47ppt. The quality of operations continues to improve, and there is a net inflow of cash from operating activities. From 1 to 3Q18, net profit from non-return was 1.28 billion yuan, which reversed losses year on year, and net cash inflow from operating activities increased by 4.884 billion yuan year on year (repayment was better than the same period last year). The development trend remains optimistic about the company's medium- to long-term development prospects, such as military industry, military trade, and civilian ship construction. As the most important construction and supporting manufacturer of Chinese naval equipment, the company will fully benefit from China's ocean-going navy construction in the future and continue to pay attention to the progress of military goods and trade business. Furthermore, we are focusing on the company's development opportunities in the civil shipping industry's cyclical recovery process, and look forward to new breakthroughs. Profit forecast Keep profit forecast unchanged. The valuation and recommended company's current stock price corresponds to 1.1/1.1 times P/B in 18/19, maintaining the recommended rating and target price of 6 yuan, corresponding to 1.6/1.6 times P/B in 18/19, with 46% margin compared to the current stock price. Uncertainty about changes in risk steel prices and exchange rates.