Matters: As an important matter of planning for Dehao Runda's suspension of trading from August 8, NES will pay all consideration in cash for the proposed sale of all operating assets and liabilities related to the LED lighting business to Leix, an important shareholding subsidiary. On the 14th, Dehao Runda announced the resumption of trading, stating that the reason for this restructuring and miscarriage was the tightening of funds accumulated by Leix due to the breach of contract guarantee. Furthermore, Dehao and Rex jointly held the industry's first launch conference for O2O lighting and smart home e-commerce platforms on November 19, announcing their official entry into the O2O field. Peace view: The Rays incident has come to an end, and the worst situation has already been reflected. On August 8, 2014, Dehao Runda plans to sell all operating assets and liabilities related to the LED lighting business to its major shareholding subsidiary Leix Lighting. NES Lighting will pay all consideration in cash. This asset sale will resolve the issue of competition between NES Lighting and the company in the same industry, facilitate the standardized operation of the two listed companies, and optimize the asset structure of both parties, which can be described as a win-win situation. However, after trading was suspended for three months on August 8, the restructuring ended in failure. Dehao said it was because Wu Changjiang, the former director of NES, was forced to deduct about 600 million yuan by the bank due to illegal guarantees that occurred during his tenure. The estimated losses could reach 164.2 million yuan, seriously reducing Rays's book cash and affecting Rays's ability to pay for this asset consolidation. In this equity battle, NES lighting dealers made concerted efforts to stand on Wang Donglei's side in this incident, which ended with Wu Changjiang being ousted from the board of directors and Wang Donglei taking full control of NES. Leix will enter a development model in the future. Currently, NES has resumed 70% of production. The next step is to fully restore production and sales order. Production efficiency has increased, and benefits have been shown. Dehao's recent production efficiency in the field of chips and packaging in the upstream LED field has increased significantly recently. In terms of chip business, the company has purchased 100 MOCVD machines from equipment manufacturers. As of the disclosure date of the third quarter report, the supply of 92 MOCVD devices from Wuhu Dehaorunda and Yangzhou Dehaorunda has arrived. Of these, 59 have been commissioned and started mass production, and 13 are being used for research and development; the rest of the equipment is in the process of installation and commissioning. It is expected that the MOCVD machines that the company will put into use next year will reach 80 units, and the pre-production capacity will increase by 50%. Furthermore, after bases in Dalian and Wuhu, Dehao Runda is currently speeding up the construction of bases in Bengbu and Yangzhou. We estimate that the chip business revenue for the full year of 2014 will reach 1.2 billion dollars, accounting for 28% of total revenue. With the construction of the new base, chip revenue is expected to reach 2.35 billion and 3.4 billion dollars in 2015 and 2016, respectively. The chip business is upstream in the LED supply chain and requires a high level of technology, along with a higher net profit margin. In terms of packaging business, Dehao brought revenue of 220 million yuan 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 could reach 59% and 14%, respectively. The Rexx channel is gaining strength. As the company completed the acquisition of 27% of Leix Optoelectronics's shares, the company received good sales channels. Judging from the current sales situation, through Rexx's sales, Daodehao can earn two kinds of revenue. The first is the direct sale of light sources. In 2012 and 2013, Rexx received revenue of 1.37 billion and 1.31 billion dollars respectively in terms of light sources, both accounting for about 40% of NES's total revenue. Dehao expects to benefit greatly from this after entering the NES sales channel. The second is revenue from supplying chips to Lex. Currently, Dehao has signed a cooperation agreement with Nix Lighting to use Dehao chips for some NES product agreements. In the future, it is expected that Dehao's products will become standard for NES. We estimate that in 2014, the cooperation with Rexx 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 contribution. Looking forward to the future, Dehao is expected to increase revenue by 300 million dollars from the Leix channel every year. It is estimated that in 2015 and 2016, with the further deepening of cooperation between Dehao and Rexx, the revenue generated by NES could reach 800 million and 1.1 billion dollars, respectively. Furthermore, Dehao and Rex jointly held the launch conference for the industry's first O2O lighting and smart home e-commerce platform on November 19, announcing their official entry into the O2O field. Currently, Dehao and Nix each have their own e-commerce platforms on Tmall, etc., and the more than 3,000 retail stores owned by NES Lighting across the country will become the “last mile” platform for O2O e-commerce in the future, achieving the function of directly providing products, designs, and post-sales services to end consumers. Through this platform, Dehao and Nestle's smart home and lighting businesses will achieve organic integration between online and offline, and enhance market competitiveness. Profits are expected to rise sharply. We expect the company's revenue for 14-16 to be 4.220 billion yuan, 5.850 billion yuan and 7.40 billion yuan respectively, corresponding EPS of 0.06, 0.30, and 0.42 yuan, respectively, and dynamic valuations of 126.9, 27.5, and 19.4 times, respectively. With world-class manufacturing equipment and talents, 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. The company's performance prospects are bright, and it maintains a “highly recommended” rating. Risk warning: risk of LED penetration rate not meeting expectations; risk of declining gross margin, etc.