Incident: 1) In 2017, the company achieved revenue of 2,286 billion yuan (YoY +13.42%); 2) The company expects to achieve net profit of 44.81 million to 54.41 million in the first quarter of 2018, an increase of 447% to 564% over the previous year; 3) Huang Changhua, the controlling shareholder and actual controller, plans to increase the company's stock holdings by no less than 20 million yuan, not higher than 10 million. The current increase will not set a price range. Investment review: 1. Overcoming the impact of the 4G post-cycle industry, the company's revenue continued to grow steadily in 2017; the month-on-month inflection point in 2018 showed that the company achieved revenue of 2,286 billion yuan in 2017, an increase of 13.42% over the previous year. Currently, the industry is in the post-4G cycle. The capital expenses of major operators have been reduced, the overall investment scale of the industry has declined, and the room for revenue growth in traditional business sectors is limited. In this context, the company has achieved steady revenue growth through the continuous introduction of new products and the continuous expansion of new businesses. In terms of revenue structure, the coaxial cable business and PCB business maintained steady growth, with growth rates of 18.7% and 17.5%, respectively; the growth rate of component and user line series products declined slightly. In terms of net profit to mother, the company achieved net profit of 130 million yuan, a year-on-year decrease of 33.42%. The decline in comprehensive gross margin and the rapid growth rate of financial expenses are the main reasons for the decline in the company's net profit. In addition, the company released a performance forecast for the first quarter of 2018, which is expected to achieve net profit of 44.81 million to 54.41 million, a month-on-month increase of 447% to 564%. The main reason is that the company adjusted the group management structure to promote the gradual implementation of refined management measures, gradually digesting the impact of rising raw materials on gross profit by providing new solutions to core customers; and mitigating the impact of exchange rate fluctuations on the company through scientific exchange rate management plans and financial measures. 2. The rise in raw materials lowered the comprehensive gross profit margin, and financial expenses increased rapidly due to exchange rate fluctuations. Continued investment in R&D laid the basic gross profit margin for the future: the comprehensive gross margin was 24.77%, down 2.56 percentage points from the same period last year. Among them, the gross margin of the coaxial cable business was 18.06%, down 8.24 percentage points from the previous year; the gross margin of PCB products was 19.76%, down 1.67 percentage points from the previous year; and the gross profit margin of communication component products was 34.49%, up 4.88 percentage points from the previous year. Some of the company's products are affected by rising raw material prices, and the bargaining power of the company and downstream customers is limited by the time cycle, which is the main reason for the decline in comprehensive gross margin. Expenses: The overall sales expense ratio and management expense ratio remained stable. The sales expense ratio was 4.17%, down 0.76 percentage points from the previous year; the management expense ratio was 8.49%, up 0.35 percentage points from the previous year. Financial expenses increased by 325.21% compared to 2016, reaching $8.2 billion. The main reason was that continued investment in new markets and fields increased capital requirements, leading to an increase in short-term loans and corresponding interest expenses. Furthermore, due to the company's 50 million US dollars of foreign exchange in Hong Kong company accounts, large exchange rate fluctuations caused large exchange losses due to large exchange rate fluctuations in the company's holding more foreign currency assets. R&D expenses: Continuous R&D investment to lay the foundation for future growth. Over the past three years, the company's R&D expenses have remained above 4.3% of total revenue. R&D expenses are mainly invested in key areas such as 5G, high-frequency PCBs, electromagnetic compatibility, and integrated underwater defense, which may be a new growth pole for the company's performance in the future. In terms of progress, some research and development work has already paid off. Among them, the overall rail connection wiring harness scheme has been verified by customers and received small-batch orders in the field of traction and braking. The underwater integrated defense system has obtained first-level qualification, and has obtained R&D results and field verification results for subsystems and sub-modules; the high-frequency multi-layer PCB board has completed the construction of an R&D test platform, and samples are under development. 3. The new product layout in 5G and military core fields is progressing steadily, opening up the next stage of growth. The company has always been committed to providing customers in different fields with one-stop solutions and product packaging and supply of customizable signal interconnection solutions. Through continuous R&D and market investment, the company continues to expand its original main business of communications and defense science and engineering to fields such as communications and the Internet of Things, defense science and engineering, rail transit, new energy vehicles, and medical care. In terms of products, the company expanded from a single RF coaxial cable to include core components in the fields of RF, electricity, and optical connections. Furthermore, through the acquisition of Jiangsu Wanbang, the company also successfully entered 5G core technology fields such as phased array, beam control, and millimeter waves, helping the company expand from core devices to core systems. At present, the company has achieved certain results in 5G and core military related technologies such as “phased array antenna array systems”, “satellite communication systems”, and “underwater and air integrated information systems”, opening up a growing market space for the company. Furthermore, as an important platform target for scarce civil-military integration, the company actively participated in mixed transformation projects at core institutions such as the 9th Nuclear Research Institute and the Shenfei 601 Institute, and set up joint ventures to carry out in-depth cooperation in the fields of light beam, optical communication, and electromagnetic compatibility; on the other hand, the company's underwater defense system is progressing smoothly, and is expected to open up 10 billion dollars in market space in the future. 4. The controlling shareholder increased its holdings, demonstrating confidence in the company's future development, Mr. Huang Changhua, the controlling shareholder and actual controller of the company, plans to increase the cumulative amount of the company's stock holdings by no less than 20 million, not more than 10 million within 12 months from April 2, and no price range is set for this increase in holdings. We believe that this increase in holdings shows the controlling shareholders' confidence in the company's future development and recognition of its intrinsic value. 5. The quarter-on-month inflection point is showing, and the mid-term layout opportunity has arrived. Maintaining a strong recommendation. Looking at a quarter-on-quarter, Q1 companies gradually absorbed the impact of rising raw materials on gross margin in 2018, while reducing the impact of exchange rate fluctuations in various ways, leading to a significant increase in net profit from month to month. Although on a year-on-year basis, net profit declined year-on-year due to the impact of gross margin and exchange rates, on a month-on-month basis, the company is entering a stage where performance is recovering quarterly, and mid-term layout opportunities are emerging. In the long run, the company is in the product introduction period. In the future, as the company continues to enter emerging fields and gradually release new 5G and military products and new production capacity, the future growth space will be determined. We expect the company's net profit for 2018 to 2020 to be $188 million, $276 million, and $362 million, respectively. Corresponding to the current share price PE is 37x, 25x, and 19x, respectively, and will continue to maintain a highly recommended -A rating. Risk warning: The development of the 5G and military goods market falls short of expectations, the promotion of new products falls short of expectations, and market competition intensifies.