Acquired Shanghai Lixin to boost the field of new energy vehicles. The company announced on the evening of the 25th that it would use some of the overfunded capital to acquire 51% of Shanghai Lixin's shares and enter the field of electric motors and controllers for new energy vehicles. Motors and controllers are the key power components of new energy vehicles. Shanghai Lixin has the core technical capabilities of permanent magnet synchronous motors and controllers. It supplies mainstream bus manufacturers such as Jinlong and Haige, with mature technology and stable customers. Benefiting from the continuous volume and trend determination of new energy vehicles in 2016, the growth space for motors and controllers as core components is expected to be quite broad. The total price is 172 million yuan. According to instalment payments against gambling targets, it clearly shows confidence in performance. The two sides agreed that the total purchase price was 172 million yuan, of which the initial payment ratio was 60% (including advance payment of 30 million yuan). After that, if the gambling target is successfully achieved in 2016-2018 (net profit after tax of 1650, 2860, and 41.8 million yuan), they will pay 7.6%, 13.16%, and 19.24% respectively, and have already agreed on a compensation agreement for failure to meet the gambling goals, which clearly demonstrates the confidence of both parties in future performance and forms a reliable margin of safety. Deeply involved in intelligent automotive power controllers, actively lays out emerging fields, and is determined to transform and upgrade. The company is a leading intelligent power controller for domestic vehicles. Its main products are rectifiers and regulators. It has been deeply involved in the OEM and AM markets for medium and high-end passenger cars for many years, and has extensive business at home and abroad. Based on core components and in line with the trend of diversification and modularization, we expect that benefiting from the trend of automobile electronization rate and professional division of labor, the future power controller market space can reach 10 billion. The company will continue to develop and optimize products, deepen the supply chain, enhance the customer structure, and have a strong competitive advantage. At the same time, the company actively lays out emerging fields, completed a fixed increase of 550 million yuan in April, invested in high-power vehicle diode expansion projects, new energy vehicle motors and control system industrialization projects, etc., and established the participating company Zhuhai Guangfayun as an important channel for future layout in emerging fields, and its determination for transformation and upgrading is clear. Investment advice. Domestic vehicle rectifier and regulator leader, deeply involved in the medium and high-end passenger car OEM/AM market. The product is modular and upgraded, the customer structure is optimized, and the determination to transform is firm. In the next 2 years, high-power diodes, intelligent motors and control systems will enter a harvest period, significantly increase profits, and grow well. Assuming that Shanghai Lixin 16H2 is merged and the dilution effect of completing the increase in 2016, we expect the corresponding EPS to be 0.48 yuan, 0.70 yuan, and 0.90 yuan in 2016-2018, corresponding to the closing price of PE on May 26, 2016, 55 times, 38 times, and 29 times. With comprehensive reference to A-share auto parts, new energy vehicles, etc., the average dynamic PE of comprehensive comparable companies in 2016 and 2017 was 76 times and 54 times, respectively. The company's dynamic PE in 2016 and 2017 was 55 times and 38 times respectively, which is at the bottom of the industry. Referring to the average dynamic PE of comparable companies, the company was given a PE valuation of 75 times in 2016, with a target price of 36 yuan, maintaining the purchase rating. Risk warning. Systemic risk; risk of mergers and acquisitions, and emerging businesses falling short of expectations.