Mergers and acquisitions of Shikai Technology actively promote business transformation, and there is great potential for civil-military integration: Euroca has formulated an “industry transformation, product transformation” development strategy based on the slump in the coal industry, the state encouraging the development of the military industry, and calling for “civil-military integration,” taking into account the current situation of the company, and determined the direction of transformation of the military industry as the company. According to the announcement, the merger and acquisition of 100% of the shares of Shikai Technology, a military enterprise, has been completed, and a military and civilian integration industry fund has been established, taking substantial steps towards transforming the national defense and military industry. Shikai Technology is a national high-tech enterprise. Its main business is research and development, integration, and production of optoelectronic technology for military weapons and equipment. The main products include anti-tank missiles, laser accelerators, and missile receivers, which have already been installed and sold on a large scale; the products being developed include portable anti-tank systems and high-precision fire control systems for armored vehicles. The company has strong profitability and is expected to have a long-term leading edge in China. The announcement shows that the subsidiary Shikai Technology promised to deduct 60 million yuan, 73 million yuan, and 86 million yuan in non-net profit from 2016 to 2018. The company will continue to benefit from civil-military integration, and its profitability will increase markedly. Lay out rail transit informatization and big data platforms, and rail transit informatization is developing well: the announcement shows that Fuhua Yuqi, a holding subsidiary of the company, has actively deployed rail transit informatization and big data platform business, and has now made good progress: in 2015, the company increased its investment in the railway set-top box market. Through cooperation with Hangmei Group and Meizheng, it won bids for the supply of general speed train set-top boxes from various road bureaus across the country, and has successively signed supply contracts including the Shanghai Bureau, Xinjiang Bureau, Jinan Bureau, Huhe Bureau, etc., bringing great economic benefits to the company. The announcement revealed that in 2015, Fuhua Yuqi ranked first in the domestic WIFI market for regular trains, and successfully developed high-speed rail WIFI. We predict that the company will form sales on high-speed rail in 2017, generate new profit growth points, continue to benefit from the popularity of railway Wi-Fi, and become one of the main drivers of the company's performance. At the same time, Fuhua Yuqi is actively investing in research and development of the Internet of Things and 4G technology. The products under development include the first 10 gigabit ring network in China and a full range of 4G-LTE digital cluster terminals to core products. Taking advantage of supply-side reforms and innovation of main business products, the main business is expected to pick up: supply-side reforms in the coal industry are beginning to bear fruit this year. According to data from the Development and Reform Commission, enterprises above the scale produced 2,556 billion tons of raw coal in the first three quarters, a decrease of 10.5% over the previous year, coal prices rose more than 50%, and the conflict between supply and demand eased somewhat. According to the announcement, the mine rail transportation system has become the automated development direction of the coal industry. After thorough verification, the company decided to use mining monorail cranes as a breakthrough to develop and produce mine transport locomotive systems to replace imports. Currently, two models of this system have been produced and finalized, and are beginning to enter coal companies. The company's coal mine underground transportation automation system has independent intellectual property rights to fill the gap in the domestic coal mine safety system, and will grow steadily as coal recovers. We expect the company to take advantage of supply-side reforms and innovate main business products. The main business will usher in opportunities for recovery and promote the growth of the company's performance. Investment advice: Buy-A investment rating, target price of 13.66 yuan for 6 months. We expect the company's EPS from 2016 to 2018 to be 0.09, 0.17, and 0.23, respectively, and the corresponding PE is 104.0, 54.8, and 40.2, respectively. Risk warning: Market demand falls short of expectations, and integration falls short of expectations.