Incident: The company released its 2017 annual report on April 27. The company achieved operating income of 272 million yuan, an increase of 32.66% over the same period last year, and achieved net profit of 70.85 million yuan, an increase of 118.36% over the previous year. Annual review: A number of composite material production lines were put into operation, laying the foundation for performance release. In 2017, the company's composite lightweight products business achieved sales revenue of 142 million yuan, an increase of 15.87% over the previous year, accounting for 52.08% of the annual revenue. The subsidiary Haiyuan New Materials has put into production 15 production lines, including 6 LFT-D glass fiber product production lines, 7 SMC glass fiber product production lines, 1 SMC carbon fiber product production line, and 1 HP-RTM carbon fiber product production line. We believe that after years of technology accumulation and exploration, the company has put into operation several composite material production lines, achieved mass production, and laid the foundation for performance release. Vehicle lightweighting has entered a new stage of rapid development. The automotive lightweight business is an important strategic direction for the company's future development, and the subsidiary Haiyuan New Materials has supplied many manufacturers in batches. 1) The MPC-1 project of Geely Renewable Energy (a subsidiary of Geely Holding Group) has entered the batch supply stage. The MPC-1 project is the first exterior body cover project for the new TX5 model launched by Geely Holding Group since it acquired London Taxi. The model is expected to be launched in batches within 2018, and sales revenue of 450 million yuan is expected to be achieved during the life cycle. In addition, the subsidiary Haiyuan New Materials has signed an investment agreement with the Yiwu Management Committee for the Zhejiang Yiwu Auto Parts Production Base construction project, which provides product support for Geely Renewable Energy. The total investment of the base is estimated to be about 1.2 billion yuan. 2) The battery box cover project of the Ningde Era has entered the opening stage of the project. It is expected to gradually enter the mass production stage this year, and the total sales revenue is expected to reach 150 million yuan during the life cycle. In addition to the battery case cover project, a new project for the Ningde Era is being negotiated. In 2017, Ningde Times's shipments reached 11.84 GWh. According to GGII statistics, Ningde Times ranked first in the global power battery market in 2017. Its IPO fundraising project plans to add 24 GWh of production capacity, and there will be huge demand for components such as the top and bottom covers of battery cases in the future. 3) The company has also reached batch supply cooperation agreements with customers such as BMW Brilliance (bottom guard, etc.), Yutong (air conditioner cover), and Dongfeng Liuqi, etc., and several projects have entered the batch supply stage. We believe that the company's automotive lightweight business is already tied to first-line lithium batteries and automakers. As multiple project orders enter the mass production stage, the company's automotive lightweight products business is expected to achieve greater breakthroughs and enter a new stage of rapid development. 4) In terms of carbon fiber composites, the company is actively promoting cooperation with various car companies to develop carbon fiber body parts products. It is progressing smoothly, and the future market prospects are broad. The building template market space is large, and the company's lightweight construction business is developing rapidly. 1) According to our estimates, during the 13th Five-Year Plan period, the annual use of urban rail transit building templates was about 10 million square meters. In 2017, real estate development enterprises had a housing construction area of 7.815 billion square meters. The amount of building formwork used was 2.5 times the unit floor area, and the demand for construction formwork in the housing construction market reached about 19.5 billion square meters. 2) The participating subsidiary E-Ante (45% indirect shareholding) continues to make efforts to establish long-term cooperation with large-scale construction companies such as China Construction, China Railway, China Railway Construction, China Power Construction, and China Communications. The company's composite formwork business has developed rapidly and has been rolled out on a large scale in public construction and housing construction such as subway projects, urban underground integrated pipe galleries, and real estate. The business is spread all over the country, and its market share has further increased. At the same time, the company's building templates have achieved export sales in South America, North America, the Middle East, Southeast Asia, Taiwan, etc., and have been widely recognized by customers and are growing rapidly. The new template products being developed by the company have achieved phased results. It is expected that mass production will be achieved in the second half of 2018, and the scope of business will be broadened horizontally. In 2017, the participating subsidiary E-Ante achieved operating income of 91.1662 million yuan, an increase of 132.92% over the previous year. Machinery and equipment benefited from the recovery of the industry, and the effects of resource integration were evident. In 2017, the company's machinery and equipment business achieved sales revenue of 117 million yuan, an increase of 77.27% over the previous year. In addition to being affected by objective factors such as national policies and industry recovery, in recent years, through the reintegration of the company's resources in various aspects of the machinery and equipment business and the reformulation of development strategies, it showed significant results in 2017, and the company's machinery and equipment business achieved significant growth in performance. In 2017, the press and complete line equipment achieved sales revenue of 883.52 billion yuan, an increase of 108.93% over the previous year. The company's large-scale equipment was successfully exported to North America and Western Europe, which also laid a solid foundation for the company's high-end machinery and equipment to enter the mainstream international markets in Europe and America. The HB permeable brick hydraulic press independently developed by the company has become a new growth point for the company in 2017 due to its green environmental protection and superior performance. In addition, the mushroom bagging machine produced by Haiyuan Intelligent Equipment Co., Ltd., a wholly-owned subsidiary of the company, cooperated on behalf of Haiyuan 3D Printing Company, has gradually been put on the market. It is expected to become a new business growth point for the company in the future, which will have a positive impact on the company's profits. Investment advice: We expect the company's net profit attributable to the owner of the parent company in 2018/2019/2020 to be 0.98/1.76/ 300 million yuan, the corresponding EPS is 0.38/0.68/1.15 yuan, and the corresponding P/E is 44/25/15 times. The company's automotive lightweight business is tied to first-tier lithium batteries and automakers, and has entered a new stage of rapid growth. The lightweight construction business is developing rapidly, the integration of machinery and equipment resources has shown results, and the inflection point in performance is prominent. We upgraded it from “increase in holdings” to a “buy” investment rating. Risk warning: The lightweight construction business market expansion falls short of expectations, the automobile lightweight market promotion process is slow, and sales of new products for presses and complete line equipment fall short of expectations.