Company announcement: The company invested 900 million yuan to participate in the establishment of the Qingdao Xingwei Equity Investment Fund Center and signed a “Stock Sale Agreement” on behalf of Korea Development Bank as the buyer and seller. The main content of the agreement is that under the preconditions agreed upon, Qingdao Xingwei used 954.98 billion won to acquire 66.37 million shares of Kumho Tire Co., Ltd. held by Korea Development Bank and other sellers representing it, accounting for 42.01% of the total number of shares issued by the bidding company. The priority purchaser (Park Sam-goo) enjoys the right of priority purchase of the shares in accordance with the priority purchase agreement, and the term of the priority purchase right is within 30 days from the date the priority purchaser receives the priority purchase right notice. The settlement of stock trading shall be carried out after the priority purchaser does not exercise the right of priority purchase and the preconditions agreed in the “Stock Sale Agreement” (including government approval, etc.) have been met or abandoned. Kumho Tire has obvious advantages over domestic companies. For example, the successful acquisition of Double Star is expected to become the new leader in domestic tires: 1) South Korea's Kumho Tire is a high-end brand with obvious market advantages: its original tires account for a high proportion, providing original tires to Hyundai, Fiat, Chrysler, Daimler, Volkswagen, BMW, Renault, GM, etc. 2) Complete global layout to avoid the “double reverse” of various countries: In addition to China, Korea Kumho Tire has 5 production plants in South Korea, Vietnam, and the US; 3) Strong R&D strength: There are 5 R&D centers around the world, located in South Korea (2), the US, Germany, and China. Kumho Tire achieved revenue of 3.2 billion US dollars, EBITDA of 510 million US dollars, and net profit of 120 million US dollars in 2014; in 2015, due to the impact of the Korean factory strike (resolved in the first quarter of 2016) and the decline in sales in the Chinese market, it achieved revenue of 2,688 million US dollars, EBITDA of 301 million US dollars, and net profit - 59 million US dollars. There are 5 R&D centers and 9 production plants around the world, with a total production capacity of 69 million units/year; of these, 3 Korean factories, located in Gwangju, Pyeongtaek, and Gokseong, have a total annual production capacity of 33.2 million units; 4 Chinese factories, located in Changchun, Tianjin, and Nanjing, with a total annual production capacity of 28.5 million units; 1 US factory, located in Georgia, with an annual production capacity of 4 million pieces; and 1 Vietnamese factory with an annual production capacity of 3.3 million units. Establishing an industrial merger and acquisition fund refers to high-quality overseas targets. On November 22, 2016, the company announced that it will invest 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 each pledged 395 million yuan and 50 million yuan 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, and the net interest rate of the new Huangdao plant has increased dramatically. The “automotive aftermarket” layout is worth looking forward to. The relocation of production capacity has been carried out in an orderly manner, and the net interest rate of the new plant has increased dramatically. After the relocation, an intelligent model factory with a 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 has adopted the O2O+E2E innovative business model to enter the “automotive aftermarket”. Currently, it is being laid out in an orderly manner, with initial results. Profit forecast and investment rating: Performance continues to grow at a high rate, and participation in the establishment of M&A funds is expected to integrate high-quality resources at home and abroad to become a new domestic tire giant. Maintain the increase in holdings rating and maintain profit forecasts. The EPS for 16-18 is expected to be 0.16 yuan, 0.23 yuan, and 0.39 yuan respectively, and the corresponding PE for 16-18 will be 55 times, 38 times and 23 times, respectively. Risk warning: Overseas mergers and acquisitions fall short of expectations, raw material prices fluctuate greatly, and market development falls short of expectations.