Note: On February 27, 2018, Taihai Nuclear Power released its 2017 performance report. The company achieved revenue of 2.53 billion yuan for the full year of 2017, +108.7% year-on-year; realized net profit of 1.04 billion yuan, +165.9% year-on-year. This performance report is in line with our previous expectations. We are commenting on this as follows: Comment: The performance is in line with expectations, and it is expected that the three-year performance commitment will be fulfilled. The company expects to achieve net profit of 1.04 billion yuan in 2017, which is in line with our previous expectations. At the time of its backdoor listing, the company promised to achieve a cumulative net profit of no less than 1.38 billion yuan after deduction from 2015 to 2017. In 2015 and 2016, the company achieved a total net profit of 350 million yuan without return to mother. According to the forecast of this performance report, the company is expected to fulfill its three-year performance promise. The financial data is impressive, the scale effect is prominent, and the product structure is optimized. According to this performance report, in 2017, the company's net interest rate is expected to reach 41.3%, +8.9pcts year on year; ROE is expected to reach 45.7%, +21.1 pcts year on year. The company's profitability has achieved high growth based on a high base. We think there are two main reasons: (1) The company received orders for domestic pipelines such as Changjiang and Zhangzhou this year, as well as orders for 4 main pipelines from France. At the same time, new products such as nuclear power aftermarket equipment have also been expanded. The company's share of nuclear power revenue in 2017 is expected to increase significantly compared to 2016, thereby increasing the company's gross profit margin; (2) As revenue doubled year-on-year, the scale effect is prominent, increasing the company's profitability. Yantai City plans to build a 100 billion high-end equipment manufacturing industrial cluster led by offshore floating nuclear power plants, and the company has benefited deeply. This performance report mentioned the development opportunities brought to the company by the construction of an offshore floating nuclear power plant. In January 2018, China Nuclear Power, Taihai Group, and Yantai Blue Sky Investment (under the Yantai State-owned Assets Administration Commission) signed an agreement to jointly launch China's first comprehensive offshore clean energy supply platform. This platform is an offshore floating nuclear power plant, which can supply water (seawater desalination), electricity (power supply), and heat (heating) from the sea to land and islands. As the only nuclear power main equipment manufacturer in Yantai, the company is expected to sign supply contracts for nuclear power equipment, special materials and equipment. We expect that in a context where the large-scale onshore nuclear power market is still unclear, offshore floating nuclear power plants are expected to become an important driving force for the company's profit growth in the next few years. What do you think of the company's future performance? (1) The 2018 results have the potential to explode. The main reason why the company's stock price has been undervalued for a long time is that both the nuclear power equipment industry and the special equipment industry are highly uncertain. However, from another perspective, with both major downstream industries sluggish, the company is still expected to achieve net profit growth of more than 160% in 2017, and also received 3.65 billion orders in early 2018. If the sentiment of the nuclear power equipment and special equipment industry reverses in 2018, the company's performance has strong potential to explode. (2) The company moved frequently during the downturn in the industry to fully prepare for the recovery of the industry. In November, the company plans to raise no more than 3.95 billion yuan in capital to continue increasing the production capacity of nuclear power equipment and special equipment. At a time of general business setbacks and strategic contraction of competitors, the company not only achieved high growth in performance, but also prepared for industry recovery in terms of capital and production capacity. We expect Taihai Nuclear Power to grow into a new generation of major heavy equipment in the next major industry cycle. Risk factors: Nuclear power equipment bidding progress falls short of expectations; product line expansion is blocked; non-public release progress falls short of expectations. Investment advice. Maintain the 2017/18/19 net profit forecast of 10.1/14.2/1.94 billion yuan (2017 results will be adjusted after the release of the annual report), the corresponding EPS is 0.97/1.36/1.86 yuan (assuming that the number of additional shares issued is 20% of the original share capital), and the PE corresponding to the closing price of 26.45 yuan is 27/19/14 times. It is recommended to give the company a PE valuation of 35 times its 2018 performance, with a target price of 47.7 yuan to maintain the “buy” rating.