Description of the incident Yichang Co., Ltd. issued a number of announcements today, including the establishment of Anhui Design Valley Technology Co., Ltd., Wuhu Yichang Technology Co., Ltd., and the capital increase of its subsidiary Shenyang Yichang Technology Co., Ltd., the main contents are: the company plans to jointly invest 10 million yuan with the wholly-owned subsidiary Anhui Yichang Technology Co., Ltd., of which Yichang shares will invest 9.9 million yuan, Anhui Yichang will invest 100,000 yuan to establish Anhui Design Valley Technology Co., Ltd. to further enhance the company's design service capabilities in the home appliances, automobile and other industries; at the same time, the company plans to jointly invest 50 million yuan with Anhui Yichang. Among them, the company invested 49.5 million yuan, and Anhui Yichang invested 500,000 yuan to establish Wuhu Yichang Technology Co., Ltd., so that the company's business gradually expanded into the automotive sector; in addition, the company also issued an announcement stating that the company plans to increase the capital of Shenyang Yichang Technology Co., Ltd. by 30 million yuan to improve the company's asset structure and enhance the company's market competitiveness. Incident review first. Industrial design capabilities have improved markedly. Entering the home appliance industry base, the company issued an announcement today stating that it plans to jointly invest 10 million yuan with Anhui Yichang Technology Co., Ltd., a wholly-owned subsidiary, of which Yichang Co., Ltd. will invest 9.9 million yuan, and Anhui Yichang will invest 100,000 yuan to establish Anhui Design Valley Technology Co., Ltd. to further enhance the company's design service capabilities in the home appliance, automobile and other industries. As a professional home appliance mold manufacturer using the DMS business model and industrial design as the core, the company's excellent design ability is the main characteristic that distinguishes the company from other mold manufacturers, and is also the foundation of the company's DMS business model. We believe that the establishment of Anhui Design Valley Technology Co., Ltd. mainly benefits from the following aspects: First, the establishment of Anhui Design Valley can significantly enhance the company's industrial mold design capabilities, lay a solid design foundation for the company's gradual expansion into various fields such as white electricity and automobiles, and promote the sustainable development of the company's DMS business model. At the same time, the establishment of a new design subsidiary can also reduce the business risk caused by the loss of personnel from a single design company. Second, considering that Anhui Province is a major producer and seller of household appliances in the country, in 2009 it ranked first in refrigerator production, washing machine production was second in the country, and air conditioning production was third in the country. At the same time, Hefei is also one of the top three home appliance industry bases in China, along with Qingdao and Shunde. It is the region with the highest concentration of domestic home appliance brands and an important base for the gradual transfer of the home appliance industry. Home appliances have a market share of more than 20% of the country. The company has placed Design Valley in Wuhu, one of China's mold manufacturing industry bases, and its location advantage is extremely obvious. The new subsidiary can make full use of the strength of Yichang Co., Ltd. in the field of industrial design to provide closer product design consulting services to home appliance and automobile customers in Anhui Province and even East China, and further enhance the company's regional design service capabilities. Finally, through the demonstration role of the new Anhui Design Valley, it is possible to drive the development of regional creative industries, so that the company can better win customer recognition of the company's industrial design capabilities, obtain more customer orders, and promote the long-term development of the company. Second, establish Wuhu Yichang, and officially enter the automotive mold industry. At the same time, the company announced that it plans to jointly invest 50 million yuan with Anhui Yichang, of which the company will invest 49.5 million yuan and Anhui Yichang will invest 500,000 yuan to establish Wuhu Yichang Technology Co., Ltd., so that the company's business will gradually expand into the automotive sector. Judging from the share of the company's main business in the medium term, at present, the company's product structure is still dominated by television exterior structural components, which account for more than 70%. The company has a relatively single product range, and its main customers are concentrated in the television industry. Under such circumstances, if the business conditions in the television industry fluctuate greatly, the company's development will definitely be affected to a certain extent. Therefore, the company has always wanted to get involved in other fields, including automobiles, white goods, and IT, in order to enrich the company's product range and reduce the business risks brought about by a single product category. Considering that design tools and design languages are compatible in developing new products, and that the injection molding machine of the molds manufactured by the company can produce various types of appearance molds, we believe that the industrial molds designed by the company can be easily copied from the field of black electricity to the automotive field. The company's establishment of Wuhu Yichang has undoubtedly strengthened the company's determination to extend its main business to the automobile industry. As the hometown of Chery cars, Wuhu is one of the important automobile production bases in China, and there are also many major automobile manufacturers in the entire Anhui region, including Jianghuai and Ankai. The company's large-scale deployment in Wuhu to expand the automobile mold business can fully enjoy the many advantages brought by location advantages, and further enrich the company's product categories through close cooperation with automobile customers, thereby accelerating the replication process of the DMS business model in the automobile industry, which is beneficial to the company's long-term development in the future. Third, increase capital in Shenyang Yichang and increase market size in the Northeast region Shenyang Yichang was founded in July 2009 by Yichang Co., Ltd. and Hefei Haiyi (Hefei Haiyi changed its name to Anhui Yichang on October 22, 2010). The company's initial registered capital was 10 million yuan, of which Yichang shares invested 9.9 million yuan, accounting for 99% of the registered capital; Hefei Haiyi invested 100,000 yuan, accounting for 1% of the registered capital. Based on production and operation needs, the company plans to increase capital and expand capital in Yichang, Shenyang. Before and after this capital increase, the share ratio between the company and Anhui Yichang to Shenyang Yichang did not change, while the registered capital was changed from 10 million yuan before the capital increase to 40.303 million yuan. We believe that this capital increase will clearly increase Shenyang Yichang's production scale in the Northeast region, which will greatly promote the company's further development of the Northeast market, help develop and expand the company's main business, and further enhance the company's market competitiveness. At the same time, after the capital increase, Shenyang Yichang's net assets will increase dramatically, financing capacity will also improve, and the asset structure will be significantly improved, which is of positive significance to the steady operation and long-term development of subsidiaries. Fourth, maintain the “careful recommendation” rating. With the establishment of Anhui Design Valley and Wuhu Yichang and the implementation of capital increases for Shenyang Yichang, the company's industrial design capabilities will be significantly improved, and at the same time, its location advantages will become more obvious. We are cautiously optimistic about the multi-field expansion brought about by the company under the replicable DMS model. The company's 2010 and 2011 EPS are expected to be 0.36 and 0.46 yuan respectively, corresponding to the current stock price PE of 36.50 and 28.36 times, respectively, maintaining the “prudent recommendation” rating.