Key investment points: The rapid growth of security business has helped the company's operating performance recover. Aerospace Changfeng achieved operating income of 1,133 billion yuan in 2016, an increase of 28.93% over the previous year; net profit of 58 million yuan was 58 million yuan, a new high since the company was listed, an increase of 97.29% over the previous year. The higher profit growth rate was due to the reduction in the company's three fee rates. By business, the security business is the main source of revenue for Aerospace Changfeng. The sales scale from 2014 to 2016 increased rapidly from 269 million yuan to 719 million yuan. We believe that with the steady progress of safe cities and smart city construction in China, the output value of China's security industry is growing at an annual rate of about 10%. Aerospace Changfeng has undertaken security technology system construction and support tasks for large-scale events such as the Beijing Olympics and the Shanghai World Expo, and has a technological lead in the field of security engineering system integration. The Second Academy of Aerospace Science and Industry, the majority shareholder, is a core institution in the field of aerospace defense in China, and there are broad prospects for future asset securitization. In February 2017, the China National Defense Bureau of Science, Technology and Industry held a special conference to promote the classification reform of military research institutes. We believe that with the introduction and implementation of the restructuring policy, the asset securitization process of state-owned military enterprises is expected to accelerate; according to information analysis disclosed at the working conference of the Second Academy of Aerospace Science and Industry, the total operating income and profit of the Second Academy of Aerospace Science and Technology in 2016 was about 30 times and 37 times that of the Aerospace Changfeng. As the only listed company controlled by the Second Academy of Aerospace Science and Industry, Aerospace Changfeng has highlighted the value of its capital operation platform. Extend mergers and acquisitions of high-quality assets to enhance the profitability of the security industry. Aerospace Changfeng announced a restructuring plan to acquire 51% of Jingyi Planning's shares and 51% of Parker Xinneng's shares by issuing shares and paying cash. Through this restructuring, Parker New Energy's power supply series products and well-planned police geographic information system products will make up for the shortcomings of Aerospace Changfeng's security business, transform the business model from a system integrator to a product provider and operation and maintenance service provider, and enhance its profitability. In addition, the former shareholders of Parker Xinneng and Jingyi Planning made separate performance promises: the total net profit of the two companies from 2017 to 2019 was 121 million yuan and 63 million yuan respectively. Profit forecasting and valuation. Since this restructuring is still in the planning stage, we are not considering its impact on the company's performance growth and equity dilution. We expect Aerospace Changfeng to achieve net profit of 69 million yuan, 68 million yuan, and 85 million yuan respectively from 2017 to 2019. The corresponding EPS is divided into 0.21 yuan/share, 0.20 yuan/share, and 0.26 yuan/share. The closing price of Aerospace Changfeng on April 28, 2017 was 26.00 yuan, and the corresponding 2017 PE valuation was 124 times, which is higher than the average valuation level of comparable companies. Therefore, for the first time, we have not given the company's target price or investment rating. Risk warning. Issuing shares and paying cash to purchase assets and raise supporting capital is still in the planning stage; competition in the security business is intense, and there is a risk that future gross margin will decline; the restructuring of military research institutes is greatly affected by policies, and progress may be lower than expected.