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Huibo Investment Research will follow the copyright protection complaint guidelines to handle the information content; Event: 1) The company issued an announcement that its wholly-owned subsidiary Zhenjiang Dongfang and Beijing Power Machinery Research Institute (referred to as Aerospace 31st Institute, the project includes electric heater body and supporting switchgear, transformer, power control cabinet, control cabinet, cables, and cooling water system, etc.), with a winning bid amount of 42.51 million yuan in total. Investment Highlights: Electric heater leader blossoms in multiple areas, core technology adds to business. The company specializes in independent R&D, production, and sales of high-performance electric heaters and their control systems, and is a leader in sub-sectors in both civil and industrial fields. This cooperation project with Aerospace 31st Institute marks the successful transformation of R&D achievements in the military field. Civil field: The company is the largest manufacturer of auxiliary electric heaters for air conditioners in China, holding about 40% market share in electric heaters for air conditioners, with major customers including Gree, Midea, Haier, Aux, etc. In the small appliance field, its controlled subsidiary Shaoxing Dongfang has become a strategic supplier to Supor, with sales expected to reach 10 million yuan/month by the end of the year, and a target sales of 200 million yuan next year. In the electric vehicle field, the company is one of the earliest enterprises to develop and mass-produce PTC for pure electric vehicles, benefiting from the global trend of electric vehicle popularization. Small appliances and electric vehicles are expected to become new growth points. Industrial field: The company is one of the very few enterprises in China that mass-produce electric heaters for polysilicon cold hydrogenation, supplying core customers with supporting polysilicon reduction furnaces, with obvious advantages in price and technology. Military field: In 2017, the company overcame the technical difficulties of electric heaters for aircraft engine testing, gaining customer recognition. The company has now become the sole domestic supplier for AVIC Commercial Aircraft Engine. In recent years, Zhenjiang Dongfang has focused on promoting the R&D, design, and application of high-temperature air source heating systems supporting the "two engines" special project, promoting the localization of supporting systems. The successful signing of the contract with Aerospace 31st Institute indicates that the company's comprehensive capabilities in R&D, design, and application in the electric heating field have been fully recognized by professional research institutes in the aerospace field. Leveraging its core technology in electric heaters, the company expands horizontally, adding to its own business, and has multiple projects under R&D. The developed quartz glass internal spray electric heater has gained recognition from Angel, and titanium porcelain coated heating tubes have received multiple orders, with the potential to grow stronger in multiple fields in the future. Polysilicon expansion cost reduction and capacity migration westward are imminent, and the peak period of investment and construction is coming. As an equipment provider, the company directly benefits. Polysilicon has obvious late-mover advantages, with new breakthroughs in processes and rapid decline in full costs. The entire polysilicon industry faces apparent overcapacity, but effective low-cost capacity is insufficient. Electricity consumption accounts for 30-50% of polysilicon costs. Some industrial areas in Xinjiang have obvious electricity price advantages, and cost reduction pressure forces capacity migration westward. At the same time, the localization rate of silicon materials is significantly lower than that of other links such as silicon wafers, and the localization progress does not match, creating demand for import substitution. According to statistics from TrendForce New Energy, domestic polysilicon capacity reached 240,000 tons in 2017, and it is estimated that new capacity of 173,000 and 129,000 tons will be added in 2018 and 2019 respectively. Currently, it is the last expansion opportunity before grid parity, and after 2020, it will benefit from the great opportunities brought by photovoltaic grid parity. Polysilicon cost reduction mainly focuses on reducing electricity consumption, with reduction electricity consumption accounting for more than 70% of comprehensive electricity consumption. The company's polysilicon reduction furnace was officially launched in 2017 and has been highly recognized by customers. The company has signed supply contracts with multiple customers such as Jiangsu Zhongneng, Xinjiang Xiexin, Inner Mongolia Tongwei, and Xinjiang Dongfang Hope. The profit margins of polysilicon reduction furnaces and corresponding industrial heaters are significantly higher than other businesses of the company. Smooth delivery of orders will bring high elasticity to the company's performance. Jiangsu Jiutian directly benefits from the rapid development of new energy vehicles. In 2016, the company acquired 51% equity of Jiangsu Jiutian with cash. Jiangsu Jiutian focuses on special composite materials for optical cables and precision materials for lithium battery steel shells. It is the only enterprise in China with the full process flow from steel strip rolling to film lamination and slitting for wide-width materials, with strong market competitiveness. Its power battery end customers include Japanese and Korean companies, domestic Lishen, and CALB. In the first half of this year, Jiangsu Jiutian's orders were full, but limited by capacity. As of the end of the third quarter, the production line for power battery shell steel base tape has started trial production, and the production line for lithium battery shell parts is undergoing installation and commissioning. The gross profit margin of lithium battery steel shells is significantly better than that of optical cable materials, and the market space is vast. The future performance upside of Jiangsu Jiutian is expected to further open up. The oil service business benefits from the rise in oil prices and is expected to contribute to performance growth. The company's wholly-owned subsidiary Ruijigetai has outstanding competitive advantages in the oil and gas extraction field, with equal emphasis on equipment manufacturing and process output services. Its products and services are widely used in many domestic and international oil and gas development projects such as CNOOC, CNPC, Sinopec, Shell, Chevron, and Unocal. Since this year, the center of crude oil prices has risen, and fixed asset investment in oil and gas has increased. The company's order volume for oil and gas processing equipment business has begun to steadily increase. We believe that the company's oil and gas equipment business will improve significantly, positively impacting the company's overall performance. Profit forecast and investment rating: The company deeply cultivates the electric heater field, and is a leader in sub-sectors in both civil and industrial fields. R&D achievements have been successfully transformed in the military field. Leveraging its core technology in electric heaters, the company expands horizontally, adding to its own business, and continues to grow stronger. Polysilicon material enterprises will usher in a peak of expansion. The company's orders in hand are being delivered quickly, and new orders will continue to emerge. High-margin polysilicon reduction furnaces and supporting industrial heaters bring performance elasticity. In addition, the lithium battery steel shell precision material business directly benefits from the rapid development of new energy vehicles. The oil service business benefits from the increase in oil and gas fixed asset investment driven by the recovery of oil prices, and is expected to contribute to performance growth. We estimate the company's EPS for 2018-2020 to be 0.14, 0.20, and 0.25 yuan respectively, with corresponding PEs of 18, 13, and 10 times. We maintain a buy rating. Risk warnings: Polysilicon order delivery falls short of expectations; heater production and sales fall short of expectations; significant decline in crude oil prices; heater price reduction risk; steel shell composite material production and sales fall short of expectations. Huaxin Securities-Star Source Material-300568-Event Review: Another Overseas Order Obtained, Strengthening Separator Leader Position-220616 Huaxin Securities-EVE Energy-300014-Dynamic Review: Strengthening Integrated Layout, Full Subscription of Private Placement by Actual Controller Demonstrates Long-term Development Confidence-220... 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