Item 1: On the evening of January 30, 2015, Dehaorunda issued an announcement to revise the company's net profit estimate. In its report for the third quarter of 2014 disclosed on October 30, 2014, the company predicted that net profit attributable to shareholders of listed companies in 2014 turned a loss into a profit compared to the same period last year, and is expected to be between 60 million yuan and 90 million yuan. After the correction, Dehao Runda's net profit for 2014 is estimated at 10 million yuan to 50 million yuan. Peace view: Things are fading, and the situation is becoming more and more clear. On the evening of January 30, 2015, Dehao collected an announcement that the net profit was reduced to 10 million yuan to 50 million yuan. This move was originally an acknowledgement of losses caused by the company's shareholding subsidiary, Rex Lighting's revenue default guarantee, and is in line with Dehao's estimated amount of about 160 million yuan after the collapse of the Races' default guarantee. The reduction in expected net profit this time is unquestionably bad for Dehao in the short term. However, in the long run, it is beneficial. Only by thoroughly clarifying the hidden risks of Rexroth's debt can Dehao welcome future expansion in a new state. In addition, Dehao is expected to bring about 168 million yuan in equity transfer income (before tax) in 2014 through the sale of subsidiary shares and related transactions on December 31, 2014. This move can ease the financial pressure currently caused by the company's default guarantee and increase cash flow. Production efficiency has increased, and benefits have been shown. Recently, Dehao's production efficiency in the upstream LED field of chips and packaging has improved significantly. In terms of chip business, the first phase of Dehaorunda's flip chip factory project in Bengbu, Anhui was put into operation in December 2014, with a total investment of 2 billion yuan. It is estimated that after the project is put into operation in the fourth quarter of 2015, the annual output value of Dehao Runda's flip chip factory in Bengbu will reach 1.5 billion yuan. At present, Dehao Runda's LED flip chip has successfully penetrated downstream manufacturers such as mobile phone manufacturers (such as ZTE) and color TV factories (such as Konka). Previously, global LED flip chips were mainly supplied by Philips, Osram, etc., and Dehao Runda's move is expected to break the monopoly situation of European and American companies on flip chips. In addition, the company has purchased 100 MOCVD machines from equipment manufacturers. As of the disclosure date of the third quarter report, Wuhu Dehao Runda and Yangzhou Dehao Runda supplied 92 MOCVD devices. Of these, 59 have been commissioned and mass production has begun, and 13 are being used for research and development; the rest of the equipment is in the process of installation and commissioning. It is estimated that the MOCVD machines put into use by the company will reach 80 units in 2015, and production capacity can be increased by 50%. We estimate that the chip business revenue for the full year of 2014 will reach about 1.2 billion dollars, accounting for 28% of total revenue. With the construction of the new base, chip revenue in 2015 and 2016 is expected to reach 2.35 billion and 3.4 billion, respectively. The chip business is upstream in the LED supply chain, requires a high level of technology, and can obtain a higher net interest rate. In terms of packaging business, Dehao brought 220 million in revenue from packaging in 2014, accounting for about 5%. Revenue from the packaging business is expected to increase to 350 million and 400 million in 2015 and 2016, respectively. Growth rates can reach 59% and 14%, respectively. The O2O model is already flashing, and the future of the Rexch channel is bright. The company owns 27% of Rexroth's shares and has good sales channels. Judging from the current sales situation, Dehao can obtain two types of revenue through Rex' sales channels. The first is direct sales of light sources. In 2012 and 2013, Lexus received revenue of 1.37 billion yuan and 1.31 billion yuan in light sources respectively, both accounting for about 40% of Rexes' total revenue. After entering the sales channel, Dehao is expected to benefit greatly from this. This is the revenue from supplying chips to Raix. Currently, Dehao has signed a cooperation agreement with Rexroth Lighting to use Dehao's chips for part of the Rexroth product agreement. It is expected that in the future, Dehao's products will become standard for Rays. We estimate that in 2014, the partnership with Rays has brought in 500 million dollars in revenue, accounting for about 12% of Dehao's annual revenue and accounting for about 9% of net profit. Looking forward to the future, Dehao is expected to increase revenue by 300 million dollars every year from the Rexer channel. It is estimated that in 2015 and 2016, with the further deepening of cooperation between Dehao and Rex, the revenue generated by Rexroth will reach 800 million and 1.1 billion dollars, respectively. Furthermore, in 2015, Dehao and Rexroth will adopt a cooperative approach to broaden their front line to Internet platforms, that is, establish omni-channel marketing. Rexroth has more than 3,000 stores across the country. The O2O model allows it to take advantage of existing offline service advantages and online cost advantages, and consumers can obtain a perfect consumer experience and more competitive prices. In addition, omni-channel marketing also includes smart e-commerce platforms. Attracting more consumers and sellers to enter through platform construction. Profits are expected to rise significantly. We expect the company's revenue for 14-16 to be 4.220 billion yuan, 58.50 billion yuan, and 7.40 billion yuan, respectively. The corresponding EPS is 0.02, 0.30, and 0.42 yuan, respectively, and the dynamic valuation is 368.7, 27.5, and 19.5 times, respectively. With world-class manufacturing equipment and talents, along with vertical integration and a broad domestic demand market in mainland China, we are optimistic about the company's expansion prospects in the LED lighting era. The company's performance prospects are bright, and it maintains a “highly recommended” rating. Risk warning: risk of LED penetration falling short of expectations; risk of declining gross margin, etc.