Key investment points Dehao Runda (002005.SZ) is now the only vertically integrated LED enterprise in China. The company was originally one of the top three largest home appliance manufacturers in the world. After recognizing the huge market in the LED energy saving industry, it resolutely entered the LED industry through mergers and acquisitions, and quickly built a relatively complete industrial cluster through a vertical integration strategy. It now has a multi-faceted layout in LED epitaxial, chip, packaging, application, and sales channels, and is determined to transform the LED industry. The company now holds 27% of the shares in Rex Lighting and is its largest single shareholder. Benefiting from the channel advantage of Rexer Engineering (3,000 outlets), it is estimated that it will contribute 1 billion dollars in revenue in 2014. The 4-inch model's production capacity advantage was unleashed, and 2014 will usher in an inflection point in performance. The company introduced a group of senior **** technical teams to greatly improve the yield and performance of the chip and packaging process. Through our field research, we found that the operating rate of 58 MOCVD units is currently at full water level, and chip performance has surpassed the 100 million yuan mark in May. In the LED business, it can be subdivided into three sub-businesses: chip/package/application. According to our estimates, the LED chip business (including epitaxial film) will benefit from increased lighting demand and capacity utilization, and revenue will reach 1.1 billion dollars in 2014, and the challenge is 2 billion dollars in 2015. The LED packaging business is gaining strength to increase the operation of firewood. Through verification in our industrial chain, the introduction of the Taiwan team has begun to bear fruit. Product quality and yield have been greatly improved. The operating rate of 40 sealed testing lines showed full water levels, and revenue in March exceeded 20 million. Under cost control and reduced material costs, we estimate that the net interest rate will have a chance of reaching double digits superior to the industry average. Furthermore, since the quality of the company's products has been recognized by the market, the monthly production capacity is currently 100 KK at full capacity and is still expanding. We estimate that the monthly production capacity will reach 200KK by the end of 2014. The LED business was covered for the first time, giving it a “Highly Recommended” rating. We expect the company's 14-15 revenue to be 44.5 billion yuan and 6.32 billion yuan, respectively, and the corresponding EPS is 0.30 and 0.58 yuan, respectively, and the dynamic valuation is 28.0/14.5 times, respectively. Although it is a latecomer in the LED industry, 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 development prospects in the LED lighting era. For the first time, we have covered it for the first time, and gave it a “highly recommended” rating. Risk warning: risk of LED penetration falling short of expectations; risk of declining gross margin, etc.