Investment highlights: The company released its 2016 performance forecast: The net profit range belonging to shareholders of listed companies was raised to 0.92 to 110 million yuan (YoY +50-80%) in 2016, of which the Q4 net profit range to mother was 108,02-29.2 million yuan (YoY-43 ~ +153%, QoQ-60 ~ +8%), which is basically in line with expectations. The main reason is that the cost of raw materials rose more than the price increase in the fourth quarter, and profits were affected. Company announcement: On January 12, the Qingdao Star Micro Equity Investment Fund, which the company participated in the establishment, submitted a binding offer to the investment bank of 42.01% of Korea's Kumho shares and received a notice on January 18, and was selected as a priority negotiation target. According to Korean media reports, according to the previous plan, once the preferred bidder is selected, Park Sam-goo must announce to the Korea Development Bank and other creditors whether he will decide to buy this share within a month, prepare a capital plan and down payment over the next 45 days, and provide creditors. If the creditor reviews that it cannot provide a higher price than the preferred bidder, the acquisition rights will return to Qingdao Double Star. Kumho Tire has a clear advantage over domestic companies: 1) Korea's Kumho Tire is a high-end brand with a clear market advantage: it accounts for a high proportion of original tires, providing original tires to Hyundai, Fiat, Chrysler, Daimler, Volkswagen, BMW, Renault, GM, etc. 2) Complete global layout to avoid “double reversals” in various countries: In addition to the Chinese region, Korea Kumho Tire has 5 production plants in South Korea, Vietnam, and the US; 3) Strong R&D strength: It has 5 R&D centers around the world, located in Korea (2), the United States, Germany, and China. (Kumho Tire profile: In 2014, it achieved revenue of 3.2 billion US dollars, EBITDA of 510 million US dollars, and net profit of 120 million US dollars; in 2015, due to the impact of the Korean factory strike (which was resolved in the 1st quarter of 2016) and the decline in sales in the Chinese market, it achieved revenue of US$2,688 million, EBITDA of US$301 million, and net profit of US$59 million. There are 5 R&D centers and 9 production plants around the world, with a total production capacity of 69 million units/year; 3 Korean plants, located in Gwangju, Pyeongtaek, and Gokseong, with a total annual production capacity of 33.2 million pieces; 4 Chinese plants, located in Changchun, Tianjin, and Nanjing, with a total annual production capacity of 28.5 million pieces; 1 US plant in Georgia, with an annual production capacity of 4 million pieces; and 1 Vietnamese plant with an annual production capacity of 3.3 million pieces.) The establishment of industrial mergers and acquisitions funds refers to high-quality overseas targets. Qingdao Shuangxing invested 900 million yuan to participate in the establishment of an industrial merger and acquisition fund, mainly investing in domestic and foreign tires, automobiles, and upstream and downstream related industries. The M&A fund uses a limited partnership model, with a total size of no more than 10 billion yuan. The company pledged 900 million yuan as a limited partner, Qingdao Guoxin Capital and Qingdao International Investment pledged 395 million yuan and 50 million yuan respectively as limited partners, and Qingdao SDIC Dehou and Qingdao Guoxin Innovation each pledged 5 million yuan as general partners. The relocation of production capacity has been carried out in an orderly manner, the net interest rate of the new Huangdao plant has increased dramatically, and the “automotive aftermarket” layout is worth looking forward to. The relocation of production capacity was carried out in an orderly manner, and the net interest rate of the new plant increased dramatically. After the relocation, an intelligent model factory with production capacity of 4 million sets of all-steel tires and 6 million sets of semi-steel tires will be built, and the net interest rate level will be greatly increased compared to the old factory. The company adopted an innovative O2O+E2E business model to enter the “automotive aftermarket”. Currently, it is being laid out in an orderly manner and is showing initial results. Profit forecast and investment rating: Performance continues to grow rapidly, becoming Kumho Tire's preferred bidder. Participating in the establishment of mergers and acquisitions funds is expected to integrate high-quality resources at home and abroad and become a new domestic tire giant. Maintaining an increase in holdings rating and maintaining profit forecasts, the 16-18 EPS is expected to be 0.16 yuan, 0.23 yuan, and 0.39 yuan, respectively, and the corresponding 16-18 PE will be 50 times, 35 times, and 21 times, respectively. Risk warning: Domestic and foreign markets are fiercely competitive, market development falls short of expectations, and there is still some uncertainty about the acquisition of Kumho.