Incident: In the 2017 annual report, the company achieved total revenue of 1,886 billion yuan, a year-on-year decrease of 14.71%, and a net profit of 44.41 million yuan to the mother, an increase of 49.98% over the previous year; basic earnings per share were 0.09 yuan, an increase of 50% over the previous year. Key investment points: Product restructuring in the defense sector to highlight the market's focus on value creation. The defense sector achieved revenue of 1,413 billion yuan in 2017, a year-on-year decrease of 19.99%, accounting for 74.90% of total revenue, and a net profit of 24.63 million yuan, an increase of 28.82% over the previous year. The company's orders in the field of large-scale weapon system assembly integration with low gross margin declined in 2017. Order tasks for guidance products with high gross margin were full, and sales increased significantly year-on-year, leading to an increase in the company's overall net profit. The joint development projects successfully bid for by the company will be ordered one after another in the latter half of the “13th Five-Year Plan”; the company is steadily focusing on R&D and technical exchanges, and has determined several aviation project development tasks in the field of optoelectronic information equipment, further enhancing the company's overall competitiveness in the field of defense. Xinhua Light Company optimizes its product structure to stabilize and expand its market share. The optical materials and devices business segment achieved main business revenue of 451 million yuan in 2017, an increase of 8.4% over the previous year, accounting for 23.91% of total revenue, and a net profit of 23.82 million yuan, an increase of 13.94% over the previous year. Xinhua Guang, a wholly-owned subsidiary of the company, continues to promote a major customer strategy in the optoelectronic materials and devices sector and successfully obtained orders for exchange lenses manufactured by Fuji; optimized the product structure to increase the sales share of high-end new products; stabilized the market share of parts; and achieved growth in the optical materials military business. Meanwhile, Xinhuaguang's global market share increased from 11% to 12% in 2017, ranking second in the domestic market share. Furthermore, the company obtained 25 authorized patents in 2017. From sales to R&D, the company's core competitiveness in the optical materials and devices sector continues to grow. Risk warning: military orders fell short of expectations, and the optical materials and device business declined.