Key investment events: The company plans to issue shares and pay cash to acquire 100% of Xingchuang Internet's shares. The transaction price is 1.44 billion yuan. The acquisition corresponds to a 14-year price-earnings ratio of 12 times. Among them, 58.64% of the shares held by Li Bo and Yin Chao were purchased in the form of shares and cash (50% shares +50% cash), and 41.36% of the shares held by Tencent Computer and Century Kaihua were purchased in cash. Issuing shares to raise supporting capital. The proposed shares will raise no more than 480 million yuan in supporting capital, and the issue price will not be less than 1,158 yuan/share. Performance commitment: Startron Internet promises that net profits not attributable to shareholders of the parent company achieved in 2014, 2015 and 2016 will not be less than 120 million yuan, 144 million yuan, and 172.8 million yuan. Xingchuang Internet: 1) Close cooperation with the Tencent platform has achieved profit since 2014 through “National Hero”. “National Hero”, a card mobile game owned by Xingchuang Internet, was launched at the end of November '13, and was launched on the WeChat platform by Tencent's exclusive agent since 2014. It is the first third-party mobile game operated by an independent agent on Tencent's WeChat platform. Thanks to the popularity of “National Hero”, the company's revenue increased rapidly in 2014, and is expected to turn losses into profits (operating income for 2012, 2013, and January to May 2014 was RMB 30 million, RMB 957 million, RMB 97.046 million, net profit was -2,0397 million yuan, and net profit was -2,0397 million yuan, -6.992 million yuan, and 63.6308 million yuan respectively). The company has a close cooperative relationship with the Tencent platform. Before the acquisition, Tencent Computer Systems Co., Ltd. held 37.22% of the shares, making it the second largest shareholder. Tencent Computer Systems was the largest customer of Xingchuang Internet's revenue from January to May 2014, accounting for 99.9% of sales revenue. The close partnership with the Tencent platform forms an important competitive advantage of Startron Internet. 2) Follow-up product reserves to spread business risks. Looking forward to the future, “National Hero” will be launched in overseas markets one after another by Garena as an exclusive agent of Garena in July '14. 14Q3 will also launch two new mobile online games, namely the RPG card fighting mobile game “Farewell” and the first full 3D flying shooter RPG mobile game “Wind Rider.” It is expected that 3-6 mobile games will be released every year from now on, and 1 game will be released overseas. The increasingly rich product line will reduce the company's future business risks. The growth rate of traditional business is slowing down, and toy manufacturers are actively seeking industrial transformation; Qunxing Toys has used this acquisition to enter the mobile game industry and build a “toy+game” entertainment ecosystem. The domestic toy industry is mostly export-oriented. Consumption in major toy export markets in Europe and the US has been weak in recent years. Coupled with rising domestic factor prices, the profit trend of traditional toy manufacturing is not optimistic. In this context, traditional A-share toy companies are seeking cross-border transformation, including Aofei Animation, Interactive Entertainment (formerly Xinghui Car Model), and Huawei Co., Ltd. With this acquisition, Qunxing Toys is leveraging the synergy between toys and games to position itself in the leisure industry. Raise the rating to increase holdings. The company's cross-border transformation now enters the mobile game industry with a high growth rate. While building new profit growth points, it also promotes mutual promotion with traditional toy manufacturing businesses to create a “toy+entertainment” game ecosystem. We expect the company's net profit after the acquisition is completed to be 152 million yuan and 182 million yuan. After issuing shares to acquire assets and raise supporting capital, the total share capital will not exceed 344.8638 million shares, combined with EPS of 0.44 yuan and 0.53 yuan, and the rating was raised to “increase holdings”. The corresponding target range is 15.4-17.6 yuan (corresponding to the 35-40 times valuation in 2014, the latest stock price of 15.45 yuan).