Honghua Group announced that it has signed an agreement with Jiangsu Hongjiangding Company to sell 51% of its shares in the offshore sector to it. Under the marine sector, Jiangsu Ocean and Shanghai Ocean are each priced at RMB 1, and FSP and Tyco are each priced at 1 US dollar. After completing the equity transfer, the offshore sector still needs to repay shareholder loans totaling about RMB 2.1 billion to Honghua. We expect that the sale of the offshore sector will bring the company a net profit of RMB 70 million, which will benefit the company's performance. Based on this, we maintain our 18/19/20 paving earnings per share forecast of RMB 0.02/0.07/0.13. Affected by market weakness, the target price was lowered from HK$0.63 to HK$0.60, corresponding to a price-earnings ratio of 20.0/7.0 times in 18/19. The current price has room to rise by 17.7% from the target price, and we maintain our excess rating. Offshore sector for sale. We believe that this equity sale has reduced the drag on the company's operating performance by offshore assets that have been losing money all year round. The offshore sector calculated operating losses of 200 million yuan and impairment provisions of 600 million yuan in 2017. After the release of offshore assets in '18, we believe that this strategic sale will benefit Honghua in the long term. This sale freed the company from offshore assets, which accounted for 66.7% of the net loss of parent assets in '17. Honghua still holds 49% of the shares in the offshore sector. In the future, the offshore sector will transition to LNG equipment manufacturing. As the LNG market continues to heat up, this will also bring new opportunities to Honghua. There are plenty of orders in hand. Benefiting from the recovery in oil prices, Honghua has plenty of orders. By the end of June 2018, Honghua had recorded in-hand orders of RMB 7 billion, of which $2.3 billion was for land drilling rigs and RMB 754 million for oil services. We expect Honghua to turn ongoing orders worth RMB 4 billion into revenue in the second half of the year. Maintain an increase in holdings. Driven by favorable factors such as a strong recovery in oil prices and an increase in the company's ongoing orders, Honghua has huge potential for future growth, and we remain optimistic about the company's future development. We maintain our 18/19/20 paving earnings per share forecast of RMB 0.02/0.07/0.13. Affected by market weakness, the target price was lowered from HK$0.63 to HK$0.60, corresponding to a price-earnings ratio of 20.0/7.0 times in 18/19. The current price has room to rise by 17.7% from the target price, and we maintain our excess rating.