Key investment points: Signing the “Letter of Intent for Equity M&A” and intelligent control of the mountain of acquisition. The company announced that it signed a “Letter of Intent for Equity M&A” with shareholders of Hangzhou Zhishan Intelligent Control Technology Co., Ltd. to intend to transfer 100% of Zhishan Intelligent Control's shares. Based on the current operating conditions and future profit forecasts of Zhishan Intelligent Control, its overall estimated value range is about 380 million yuan to 420 million yuan. The final transaction price is based on the evaluation results. The method of payment for consideration is cash. Zhishan Intelligent Control's performance commitment. Existing shareholders of Zhishan Intelligent Control have promised that in 2017-2019, the cumulative net profit of Mountain Intelligent Control deducted from non-return parents should not be less than 100 million yuan. Zhishan Intelligent Control: The dedicated textile servo market has accumulated a lot. Zhishan Intelligent Control uses fully digital intelligent servo, stepper and other motion control units as its core products. Downstream covers CNC machine tools, packaging, printing, electronic equipment, textiles, plastics and other industries, and has begun promotion in emerging industries such as wind power, medical equipment, and hybrid vehicles. The company's textile-specific servo system has deep market accumulation, and has a high market popularity and share in application fields such as computer knitting machines, knitting hosiery machines, computer embroidery machines, circular machines, etc., as well as CNC machine tools. Zhishan Intelligent Control: Wide market layout. The company's domestic service network covers East China, Central China, South China, North China and other regions, and has built service stations in Dongguan (Dalang), Suzhou (Changshu), Yantai (Haiyang), Jiaxing (Tongxiang), Ningbo (Cixi), Shaoxing (Keqiao), and Taizhou (Luqiao). At the same time, it is actively promoting the construction of an international service network, setting up offices in India, Bangladesh and other countries, and acquiring Zhishan Intelligent Control: improving the layout of the operation control system and promoting downstream expansion. Through the parallel path of endogenesis and epitaxial, the company has formed a full industry chain layout of “key core components - main body - engineering application - teleinformatization”. Among them, in the middle and high-end servo field, it has developed a certain industrialization capability and has the ability to provide overall solution solutions. Servo products based on industrial Ethernet buses have been widely used in the field of multi-axis robots and intelligent equipment for 3C products. The acquisition of Zhishan Intelligent Control will help improve the company's layout in motion control systems, achieve effective grafting with the company's and subsidiaries' advantages such as motion control and servo technology, overall solution integration capabilities, and channel expansion, promote the company's servo market scale and business volume, and continue to promote the expansion of downstream fields. Overall view: Robotics and operation control are developing rapidly. Looking ahead to 2017, the company's robotics and motion control will continue to show rapid development. The company plans that revenue in this sector will exceed 2 billion yuan, and that the sales volume of self-produced robot bodies will double to exceed 1,600 units. The company recently announced plans to issue convertible corporate bonds, raising no more than 883 million yuan in total capital. Fund-raising projects mainly include - intelligent manufacturing projects for robots, key components and motion control system products, and intelligent flexible welding production line production projects for automobiles. The issuance of bonds will effectively ease the company's recent financial pressure while continuing to promote the layout and development of the robotics and motion control sector. Profit forecasts and investment advice. We expect the company to return net profit of 202 million yuan and 234 million yuan respectively in 2017-2018, corresponding to earnings of 0.33 yuan and 0.38 yuan per share. The 2017 valuation was 40-45X, corresponding to a reasonable value range of 13.2-14.85 yuan/share. “Buy” rating. Major uncertainties. Market competition risk.