Incident: Rainbow Co., Ltd. announced its three-quarter report. The company achieved operating income of 241 million yuan in the first three quarters of 2016, an increase of 3.71% over the previous year; a net profit loss of 92 million yuan, a loss of 230 million yuan in the same period last year. The loss narrowed markedly, and earnings per share were -0.13 yuan. It is worth noting that the company achieved a profit of 16 million yuan in the third quarter (loss of 61 million yuan in the second quarter, and 73 million yuan in the same period last year). Comment: The increase in the company's glass substrate sales in the first three quarters brought about a slight increase in main revenue. In terms of expenses, sales expenses fell by 31.60%, mainly due to the increase in the yield rate of future glass substrate products, which led to a decrease in sales of three-pack sales costs. Judging from the company's profitability, both the level of gross margin and return on net assets showed a marked improvement over the same period last year, and there was also a marked increase from month to month. Overall, the gradual improvement in the company's glass substrate business and the steady increase in demand from downstream customers are expected to continue to improve the company's future performance. The company's biggest highlight is the subsequent profitability of the company's glass substrate production line for G8.5 generation glass substrates. After completion, G8.5 will focus on serving Xianyang 8.6 generation panels and CLP Panda 8.5 generation lines, and will continue to develop new customers in the future. The overall yield of the company's 8.5 generation line has increased steadily compared to previous years. Currently, the yield rate of front-end kilns remains around 85%, which is close to Corning's yield level. It is estimated that 6 8.5-generation lines will be completed by 2018, and the annual production capacity is expected to reach 3.4 million pieces. The first 8.5 generation line will be put into operation in Q4 in 2017, and Xianyang's TFT-LCD will be put into operation in February 2018. We judge that the inflection point of the company's glass substrate business has arrived. It is expected that the company's profitability will increase significantly in 2017, and 2018 is expected to enter a period of performance release. In the future, the company's core business will revolve around G8.5 generation glass substrate production volume and cover glass profit, and the company is expected to become a leader in new domestic display devices. Maintaining the “buy” rating, the profit forecast is as follows: Risk warning: (1) The sharp drop in glass substrate prices dragged down the company's performance (2) the commissioning of the new glass substrate production line fell short of expectations.