Incident: The company announced that QI-Q3 revenue in 2016 was 961 million yuan, up 3.65% year on year, and net profit was 37.96 million yuan, up 35.58% year on year. China Investment Electronics's view: Division reform has accelerated the release of high-end products, further increased investment in R&D of high-end products such as IGBT, and is full of momentum. Since this year, the company has continued to push forward division reforms. The IGBT product team focuses on serializing sixth-generation IGBT and MOS products: the high-end diode team focuses on serializing TRENCH SBD and FRD products; the bipolar product team focuses on promoting the serialization of SCR and discharge tube products for middle and high-end applications. By further promoting the expansion of module technology to high-end application fields, the company has achieved technology promotion extending from chips to modules and from a single product to a solution, maximizing its comprehensive advantages in the field of technology, and quickly achieving expansion work in key target application fields. With the gradual mass production of the company's new products, the company's development momentum has been strongly guaranteed, and the annual performance is still guaranteed. The construction of process platforms has been continuously strengthened, and process technology transformation capabilities have been further enhanced. The ability to control process technology is the core competitiveness for the continuous development of power semiconductor companies. The company has continuously carried out process optimization on the basis of the original technology accumulation. It has now achieved the integration and optimization of 4 inch wire to BJT, discharge tube, and SCR product process technology platforms; the integration and optimization of five-inch wire-to-plane, TRENCH high-end diodes, and CMOS process technology platforms; and the integration and optimization of the six-inch wire MOSFET.IGBT process technology platform: The company's comprehensive process technology “control ability” has been fully reflected. Actively promote the development and manufacture of third-generation new material devices in order to overtake leading international companies in the field of power semiconductors, and strive to be the first in the domestic power semiconductor device industry to enter the ranks of leading international enterprises in the domestic power semiconductor device industry at the end of the 13th Five-Year Plan period, and establish a national brand with international influence. Key investment points: The company is a leading “chip-level” power semiconductor company focusing on design+material innovation and special processes. It is also a scarce “autonomous and controllable” A-share target with over 50 years of technology accumulation. With long-term technology and market accumulation, the company will achieve a breakthrough in the industry, coinciding with the investment and financing boom of leading local companies and the “golden cycle” of rapid development of international industry leaders such as Infineon; actual controller changes and equity incentive plans indicate that internal governance has come to an end, and it is expected to usher in a sustainable rapid development cycle. The explosion of high-growth industries and autonomy and control have comprehensively spawned the rapid growth of high-end power semiconductors such as IGBT/intelligent module IPM. New energy vehicles and their charging equipment are in strong demand for IGBT chips and module products. The cost of power modules alone is as high as 10%, and local demand alone has reached 60 billion yuan. Historically, the company has provided strong guarantees and support for construction related to the national military industry. Currently, with the obvious development trend of electromagnetization of high-end weapons and equipment, it is urgent for domestic replacement to achieve autonomous and controllable; the company's capabilities have reached the international level, and it is expected that the profit level will increase rapidly by relying on strong demand to achieve high value-added products. Third-generation power devices welcome a huge potential market, and the company has sufficient subjective and objective conditions to meet new opportunities. Third-generation power semiconductors and existing high-end products have obvious inheritability in core aspects such as materials/structure/process/packaging. Under the company's IDM model, they can fully meet the development needs of new material devices. The technology is gradually being extended, and expectations for high-end production capacity expansion and technology upgrading are very strong. The target price for the “Highly Recommended” rating is $14. Net profit for 16-18 is expected to be 0.95/2.05/350 million yuan, EPS 0.13/0.28/0.47 yuan, a year-on-year growth rate of 121%/115%/71%. The trend of industry resource integration gives the company strong endogenous epitaxial development expectations; military/new energy sources are in urgent need of breakthroughs, and high-value-added products continue to optimize profitability; under the emerging pattern of power semiconductor strategies, the current situation of “big industry and small companies” gives sufficient space; given high future performance growth and PEG considerations, it has shown a trend of increasing sales revenue and gross margin, and potentially breaking through the high valuation center of the industry and the scarcity of targets, giving 50 times PE in 17 years, with a target price of 14 yuan. Risk warning: Localized substitution of local semiconductors and the risk that the expansion of new application fields will fall short of expectations.