Incident: On January 10, 2016, Qingdao Tianhuayuan Chemical Engineering Co., Ltd. (the “Company” for short) received the controlling shareholder's “Notice Concerning the Acquisition of Rubber, Plastic and Chemical Machinery Manufacturer Kraus Maffei Group” from the controlling shareholder. The actual controller of the company, China Chemical Group Corporation and its holding company China Chemical Equipment Co., Ltd. set up a project company in Germany, on the other hand, and Munich Holdings IIconporations.à.r.l., held by Canadian Onex, signed on January 9, 2016 The “Share Purchase Agreement” acquired 100% of the shares of Germany's Krauss Maffei Group GmbH (Krauss Maffei Group, “target company”) owned by Canadian Onex. Comment: The controlling shareholder's asset securitization is accelerating, and the acquisition of overseas chemical equipment companies is committed to building an international advanced chemical equipment sector. The actual controller of the company, China Chemical Group Corporation, under the leadership of its general manager Ren Jianxin, has always adhered to the strategic idea of integrating domestic collaborative assets through its professional ability to integrate domestic collaborative assets and achieve securitization through its listed companies' platforms to accelerate the securitization process of its assets and accelerate the process of securitization of its assets. It has completed asset integration work in its tire sector, methionine sector, and agrochemical sector. Currently, it has acquired 100% of KraussMaffei's shares, indicating that the company is committed to building an international advanced chemical equipment sector, and Tianhuayuan is expected to inject large assets as its chemical equipment listing platform. The German KraussMaffei Group is one of the world's leading suppliers of equipment and systems for the production and processing of plastics and rubber. The KraussMaffei Group relies on innovation to achieve development, providing products, processes and services in the form of standard and customized solutions, bringing continuous added value to the customer's value-added chain. The company's products and services cover a full range of injection and reaction molding and extrusion technology, laying the foundation for the company to stand out in the industry. The company's KraussMaffei, Kraussmaffe-Berstorff and Neichter brands target customers in the automotive, packaging, medical, construction, electrical, electronics and household appliances industries. With a global network of more than 30 subsidiaries and more than 10 factories, and supported by around 570 sales and service partners, the company can provide nearby services to customers around the world. In 2011, sales revenue was 928 million euros, gross profit was 201 million euros, and gross margin was as high as 21.7%. The non-public stock offering was approved by the State Assets Administration Commission, and the fund-raising project was mainly used to increase the production capacity of lignite drying equipment and urban sludge treatment plants. The company's plan for the non-public offering of no more than 74.87 million shares has been approved by the State Assets Administration Commission. After the issuance is completed, the company's total share capital will not exceed 467 million shares. Currently, the corresponding market value after the additional issuance is 6.2 billion yuan. The first phase of the company's Nanjing Tianhua was completed and put into operation in 2010, and is currently unable to meet the needs of downstream orders. The funds raised this time are used for the Nanjing Tianhua Phase II project, which is mainly used to increase the production capacity of lignite drying equipment and urban sludge treatment plants. In order to ensure that the company's patented technology is not lost, the core components are mainly produced at the company's Nanjing base, and the cycle is long. Taking lignite drying equipment as an example, it takes 1 year for one piece of equipment to be delivered. Therefore, after completion of the second phase of the project, the company's production capacity level will be effectively raised, thereby enhancing the company's competitiveness in the market. Petrochemical equipment is affected by the market and continues to be sluggish, and the prospects for transforming the environmental protection industry are broad. The company's main business is drying equipment. In the early days, drying equipment was mainly used in the petrochemical industry, but recently the petrochemical industry has continued to be sluggish due to market effects such as overcapacity and falling prices, and the company's petrochemical orders have been drastically reduced. In line with the country's environmental protection needs, the company has developed a series of environmentally friendly drying equipment including lignite drying equipment and urban sludge treatment equipment through equipment design and development. Due to the company's leading position in the drying equipment industry, foreign orders also continue to grow, so the transformation of the environmental protection industry will have good competitiveness, and the prospects for transforming the environmental protection industry are very broad. The company has outstanding R & D capabilities and rich technical reserves for follow-up. The company has undertaken and completed many national scientific research and development projects over a long period of time, and has received many awards for major scientific and technological achievements at the national and provincial levels. By the end of 2014, the company had obtained 452 major scientific and technological achievements. In addition to lignite drying and urban sludge treatment equipment, others, such as the application of drying equipment in the grain processing industry, new material technology for electrolyzers, ultra-high molecular polyethylene, and aramid technology, etc. are the company's backup technology, which is expected to achieve industrial breakthroughs in the future. Profit forecast, valuation and investment rating: We expect the company's net profit attributable to the parent company in 2015-2017 to be 80.29 million yuan, 88.56 million yuan and 96.7 million yuan respectively; the 2015-2017 diluted EPS is 0.20 yuan, 0.23 yuan and 0.25 yuan respectively. The dynamic PE corresponding to the closing price on January 8, 2016 (12.76 yuan/share) is 62, 56, and 52 respectively. Considering the broad market space of the company's transformation into the environmental protection industry and asset consolidation expectations of controlling shareholders, the company's rating was raised to the “increase in holdings” rating. Risk factors: equipment orders fall short of expectations; adjustments to preferential national tax policies, etc.