Event: on November 15, 2016, the company announced that it signed a "subcontract for the design, construction and delivery of multi-function offshore construction Jack-up platform" with China Communications Machinery and Machinery, the contract amount is 128 million yuan, and the performance period of the contract is before February 22, 2018.

The traditional business blossoms, and the transformation business plate constitutes the performance support. Ship and marine engineering is the company's traditional business. Relying on years of accumulation, the company has successfully delivered more than 1000 ships and marine engineering projects of all kinds. With the continuous investment in technological research and development and market development, the company's ship and marine engineering products development capabilities and technical service capabilities are still strengthening, and the market recognition in high-end areas is also increasing. The contract accounts for about 10.73% of the company's total revenue in 2015 and is expected to have a positive impact on the company's operating performance in 2017 and the first half of 2018 according to the progress of the project. By the end of the third quarter of 2016, the company has successfully acquired three companies, including Woking Utilization, Jennifer Transportation and Golden Shipping, by means of capital operation, all of which are running well. The performance growth of the company's main business comes from the sales of gold maritime defense equipment related products and Woking natural gas. Among them, Woking promised that the audited net profit in 2015, 2015 and 2016 would not be less than 20 million yuan, 26 million yuan and 33.8 million yuan, and the actual controller of Jin Shipping promised that the total net profit of annuity shipping in 2014-2017 would not be less than 287 million yuan. It strongly constitutes the performance support of the company.

The military-civilian integration science and technology industrial park is the company's long-term planning and has a bright future. The company and the administrative committee of Taizhou Pharmaceutical High-tech Industrial Park signed the Framework Agreement on June 28, 2016, which intends to invest in the establishment of the first demonstration military-civilian integrated science and technology industrial park in China. Make use of the qualifications, market and technological advantages of the existing military industry of Tianhai Defense and its holding subsidiaries to design, manufacture and serve all kinds of equipment that cover the defense needs of the whole army to form a large-scale industry. This move gives full play to their respective resource advantages, actively responds to the national defense development strategy of civil-military integration, and integrates military and civilian resources to serve the country's national defense construction. If implemented smoothly, Tianhai Defense will enter a new voyage in the field of military industry, which has great prospects for development.

The synergistic effect is obvious, and it is expected to enter the field of military auxiliary ships. The company seized the historical opportunity of large-scale investment by the navy, acquired complete qualification for the production of military products after the acquisition of gold shipping, and cut into the field of military auxiliary ship manufacturing under the background of the decline of the civil ship market, which opened up a broad space for the future development of the company. After the completion of the acquisition, the company's external Otsu heavy Industry is expected to serve as the company's production platform, Tianhai Defense provides the design of military auxiliary ships, and Jinhai provides military industrial qualifications, which complement each other and have a significant synergistic effect.

Profit forecast and investment advice. It is estimated that the EPS in 2016-18 will be 0.61,0.87,1.30 yuan respectively. Considering the valuation premium brought by the transformation of military industrial business and the growth space of the subsequent military-civilian integration industrial park, combined with the comparable company valuation, the company will be given 70X in 2016, maintaining the target price of 42.70 yuan and maintaining the "buy" rating.