Core view: Take the lead in localizing non-refrigerated detectors and establishing a core competitive advantage The automotive infrared market is about to start. The company enjoys a first-mover advantage, and the military business has entered a fixed harvest period to ensure steady growth in performance. The company takes the lead in localizing the “soul” component of infrared cameras - the unrefrigerated focal plane detector, and has established a core competitive advantage. The US and France have a monopoly on the core technology for the industrialization of focal plane detectors, and strict technical controls and export licensing systems have greatly limited the development of infrared industries in other countries. China's focal plane detectors are basically from France, and ULIS is the most important supplier. After years of research and development, the company took the lead in localizing a series of medium and high resolution uncooled focal plane detectors with three spacing of 45 microns, 35 microns, and 25 microns. Among them, the 25 micron and 35 micron series are currently mainstream models, and the French government limits export quantities. The performance quality of the company's two series detectors can completely replace products imported from France. A fixed increase in production capacity promotes the industrialization of infrared thermal cameras. The capital raised was used to build production lines for 6,000 infrared thermal imagers and 13,000 uncooled focal plane detectors, and to supplement working capital. Priority is given to guaranteeing personal use of detectors. If there are any leftovers, only export sales will be considered. The thermal camera project can contribute 472 million yuan/year in revenue after delivery, 1.8 times the company's total revenue in 2013, and the profit is impressive. The company chose the automotive aftermarket as an entry point to open up territory in the automotive infrared field. Automobiles are the largest market for civil infrared cameras, and demand for thermal cameras has not been effectively leveraged only because of the high prices of thermal cameras. Even in foreign countries, only high-end models from high-end brands such as Audi and BMW are compatible. After localizing detectors, the company actively developed new packaging technology and special chips to further reduce the cost of thermal cameras, so as to promote their industrialization and commercial application. We believe that with the reduction in cost and price, the in-vehicle infrared system will be the next car sunroof. It has evolved from high-end models to standard for middle and high-end models, and finally popularized as standard for automobiles, so there is huge room for development. The company's military business focuses on “steady growth.” In 2004, the company tested the waters of the military products industry. In 2008, it obtained the qualification of a military product manufacturer from the Ministry of General Equipment and the National Defense Science, Technology and Industry Commission, and undertook military components and complete aircraft projects under its own brand. So far, more than 30 items have been carried out. At present, the company's military scientific research projects have moved from the cultivation period to the fixed harvest period. The added value of some projects is high, and the return on profit has increased markedly, which is enough to guarantee the steady growth of the company's performance over the next 2-3 years. Profit forecasts and valuations. We expect the company's EPS for 2014-2016 to be 0.36 yuan/0.51 yuan/0.66 yuan, corresponding to 56 times /40 times /31 times PE. We are optimistic about the company's trilogy of localization of technology, price popularization, and product standardization of infrared cameras, giving it an “increase in ownership” rating for the first time.