Key investment events: Intel Semiconductor (Dalian) Co., Ltd. will subscribe for 9.09% of Leyuan Digital shares for 30 million yuan. After this share transfer, Chukyo Electronics will hold 20.45% of Leyuan Digital. Chukyo Electronics previously increased capital and transferred shares in Leyuan Digital, holding 22.5% of shares, and reached an agreement with the original shareholders to acquire the remaining shareholders. Intel's current shareholding does not affect Chukyo Electronics' acquisition of Leyuan's remaining shares. According to the announcement, Intel Semiconductor (Dalian) Co., Ltd. purchased Leyuan Digital with a consideration premium of 30 million yuan to increase the total registered capital of 539,2222 yuan. After the transaction is completed, the paid-up registered capital of Leyuan Digital will increase to 59314,444 yuan. Intel Semiconductor (Dalian) Co., Ltd. will hold 9.09% of the shares, Chukyo Electronics will hold 20.45% of the shares, and Le Liuping will hold 54.13% of the shares. Leyuan Digital is the leading smart wearable pioneer in China. Since last year, the entire wearable device market has fully shown a flourishing attitude. Companies of all types are looking to join this wave of technology and play different roles in the industrial chain. The trend of integrating hardware, software, and platforms will make competitors play more diverse ways to play, and will inevitably shift the global terminal manufacturing chain to China. Local terminal manufacturers such as Huawei and ZTE will increase their market share with low-cost R&D advantages, and the local terminal supply chain will have more diverse options for entering the supply chain of international giants. Compared to international brands actively deploying in the field of wearable devices, not many domestic manufacturers are involved; most of them are on the sidelines. In addition to the early steps of Nutshell Electronics and Yingqu Technology, Leyuan Digital is a smart wearable industry company with a complete range of smartwatch product categories, core R&D technology, and unblocked sales channels in China. It has mastered the core technology of wearable intelligence and cloud development and application capabilities. The product business involves three major fields such as smart care, health management, and fashion and sports. In the future, as the layout of the wearable device industry gradually deepens and related technology gradually matures, various manufacturers will invest more capital and manpower based on this new industrial chain, and the wearable device field will become a new market growth point after mobile phones and tablets. Chukyo Electronics has contributed significantly to the performance of the smart wearable standard. Since May 2014, through a capital increase in Leyuan Digital, Chukyo Electronics has transferred part of Leyuan Digital's shares held by shareholders Le Liuping and Guangyuan for 37.5 million yuan. The shareholding ratio reached 22.5%, and an agreement was reached with the original shareholders. Under the conditions that the performance is in line with expectations and the purchase of shares issued by listed companies, Chukyo Electronics will issue shares to purchase assets to acquire the remaining shares. It is expected that Chukyo Electronics plans to launch an acquisition plan in 2015. Leyuan Digital has achieved net profit of about 55591 million yuan in the first quarter of 2014, and the company's shareholders promised that net profit of not less than 35 million yuan, 50 million yuan, and 65 million yuan in 2014, 2015 and 2016, respectively. According to the latest shareholding ratio, Leyuan Digital will contribute 7157,500 yuan to the net profit of China Beijing Electronics in 2014, accounting for 60.50% of the net profit of listed companies in 2013, and will become an important performance growth point for Chukyo Electronics in the future. Smart wearables are leading the way to take back the mobile market. Intel has been lagging behind in the field of mobile smart terminals for a long time. Competitors such as Qualcomm, Nvidia, and MediaTek control 95% of the smartphone chip market, while Intel is struggling in this field, making substantial progress. Intel will take the lead in wearable technology and take a detour to explore the mobile market. Although wearable technology is still in its infancy, Intel has an opportunity to firmly seize this opportunity right from the start and not play the role of a catcher like it did in the mobile chip industry. Under Intel's leadership, Thalmic Labs has completed a new round of financing of 14.5 million dollars, and Intel has also acquired Omek Interactive, an Israeli gesture control startup. Intel completed its acquisition of Basis Science in March of this year. This acquisition of Leyuan represents Intel's recognition of the Leyuan brand and technology. It is expected that cooperation between the two sides will continue to deepen in the future, and wearable leaders have already surfaced. As a rising star in the wearable market, Intel continues to increase its investment in the smart wearable field through acquisitions and the establishment of innovation funds, etc., and will reduce the distance with Google and Apple in this field and strive to gain a place in the wearable market in the future. Profit forecast: The company and Intel inadvertently selected Leyuan Digital as an important layout point in the smart wearable field. The hero's vision was slightly similar. The approval and technical support of IT giants strengthened the explosion of the domestic wearable market. Leyuan Digital becoming a leading wearable event would be a likely event. As the pioneer, China Beijing Electronics benefited the most, and its performance increased significantly. Due to the unpredictability of the wearable market explosion, we expect the company's revenue in 2014-2016 to be 4.94, 5.56, and 727 million yuan, and net profit attributable to shareholders of the parent company of 0.16, 0.21, and 0.3 billion yuan, corresponding EPS is 0.07, 0.09, and 0.13 yuan, respectively, and the corresponding PE is 284, 221, and 154 times. We are optimistic about the company's future explosion in the wearable device market and the establishment of a leading position. We will give it a “buy” rating, with a target price of 25 yuan. Risk warning: The promotion and expansion of the domestic wearables market is slower than expected; the company's further acquisition process of Leyuan Digital may not proceed as scheduled.