Incident: According to the company announcement, Huaxin Co., Ltd. plans to inject 92% of Huaxin Securities's shares through a major asset restructuring. After the transaction is completed, Huaxin Securities will become a wholly-owned subsidiary of Huaxin Co., Ltd. The main business of Huaxin Co., Ltd. has changed to a situation where the main business of Huaxin Co., Ltd. has changed to a situation where the securities business is mainly, the rental management of small holdings of properties, and other businesses are supported, so it will no longer engage in real estate development business. The business structure of Huaxin Securities has been further optimized. In the early stages, the company focused on developing businesses with low capital consumption. Brokerage business (42%) and investment business (32%) were the main sources of revenue for Huaxin Securities, resulting in large profit fluctuations. In the future, relying on listed companies' platforms, financing channels will be broadened, capital will be replenished, and the company's credit trading business, self-operated business, etc. will develop rapidly, and the business structure will be further optimized. (1) Brokerage business expands outlets and steadily increases market share. Over the past three years, Huaxin Securities has expanded from 21 to 60, and the market share has steadily increased to 0.34%, and the commission rate has continued to decline. The company's commission rate for the first 8 months of 2016 was 4.85 parts per 10,000, but the decline has slowed down. It is expected that the brokerage market share will remain stable, and the commission rate will remain around 0.046%. (2) Capital is replenished to accelerate the development of credit business. The overall development of the company's securities financing business is relatively stable. As of the end of December 2016, the company's securities financing balance reached 34 trillion yuan, with a market share of 0.36%. 800 million yuan of capital raised this time will be invested in credit trading business, which will help accelerate the development of the company's securities financing business, and the market share is expected to reach 0.4%. (3) When China and foreign countries cooperate to carry out investment business, stock and bond underwriting has advantages. The investment banking business of Huaxin Securities is mainly carried out by Morgan Huaxin, a subsidiary jointly established with Morgan Stanley. The advantages of Sino-foreign joint ventures are obvious. The investment banking business became Huaxin Securities's second largest revenue source. In the first 8 months of 2016, Huaxin Securities achieved investment banking revenue of 290 million yuan, accounting for 33% of total operating income. With the unique competitive advantages of Sino-foreign joint ventures, the company's underwriting capacity continues to improve. In 2015, the principal underwriting amount of corporate bonds ranked 11th in the industry, and the principal underwriting amount of corporate stocks ranked 14th in the industry. The continued acceleration of the IPO in 2017 helped the steady development of the underwriting business. (4) Differentiated development of asset management business and establishment of public offerings to promote collaboration. Since 2014, Huaxin Securities's asset management business has grown rapidly. As of the end of August 2016, the fiduciary asset management scale was 112.4 billion yuan, an increase of nearly ten times over the end of 2014. The company has achieved differentiated development in asset management business. As of the end of August 2016, the company has registered 7 asset securitization products, ranking 17th in the industry. As the largest shareholder, the company has jointly established the Morgan Stanley Huaxin Fund with Morgan Stanley and other institutions. Since the beginning of 2016, the fund company's asset size has remained around 27 billion yuan and is located in the middle and upper reaches of the industry. It contributed more than 4.5 million yuan in revenue to Huaxin Securities in the first 8 months of 2016. The differentiated development path is conducive to forming unique competitiveness. (5) Equity investment accounts for a high proportion, and the income elasticity of self-operated business is high. As of the end of August 2016, Huaxin Securities's equity business scale was 466 million yuan, while the bond-type self-employment scale was 370 million yuan. The scale of equity self-employment exceeded the scale of bond-type self-employment. The relatively high share of equity investment brought great flexibility to the self-operated business. A fixed increase of capital of 200 million yuan will be invested in self-operated business. If the market stabilizes, the self-operated business performance will improve markedly. A fixed increase enhances capital strength and improves performance. Huaxin Securities currently has net assets of about 3.6 billion yuan. The company's capital strength will be enhanced by raising about 1.2 billion yuan in supporting capital this time. Small and medium-sized brokerage firms are more flexible in terms of mechanisms and have higher operating efficiency. After the net capital is replenished, performance is expected to increase dramatically. Shareholders are rich in resources and are deepening the integration of industry and finance. After the major asset restructuring is completed, Huaxin Co., Ltd. will become the only financial listing platform for Shanghai Yidian Group. More than 140 companies under the Shanghai Yidian Group are expected to provide Huaxin Securities with more business cooperation opportunities. On June 8, 2015, Huaxin Securities and the Shanghai Branch of the Shanghai Yidian Group and the Shanghai Branch of China Construction Bank jointly established a smart city industry fund with a scale of 2.5 billion. The integration of industry and finance will be further deepened in the future. Investment advice: Increase holdings - A investment rating, target price of 16.8 yuan for 6 months. After completing the major asset restructuring, Huaxin Co., Ltd.'s EPS earnings per share from 2017 to 2018 are expected to be 0.43 yuan/0.62 yuan, respectively. Risk warning: sharp macroeconomic downgrade/sharp contraction in market volume/major asset restructuring failure.