Incident: The company issued an announcement on the evening of February 20, 2017 to adjust the public offering plan. The issuance targets were two specific investors from Weihai Poly and Poly Phase I, with a capital raised of 1,073 million yuan to invest in new military special vehicles and exoskeleton robot projects. It is expected that after the fixed increase is completed, Weihai Poly and Poly Technology, the actual controller of Poly Phase I, will hold 6.59% of the shares and become the company's second largest shareholder. Main views: 1. In-depth cooperation with Poly Technology responds to the new regulations of the Securities Regulatory Commission. The company has adjusted the fixed price increase. If 90% of the average price for the previous 20 trading days, or 6.29 yuan/share, is issued according to the board resolution, and the number of shares issued is 170 million shares, after the fixed increase is completed, Weihai Poly and Poly Phase I will hold a total of 6.59%, becoming the company's second largest shareholder. According to the new regulations, the fixed increase issuance price uses the pricing on the first day of issuance. The actual price and shareholding ratio of the fixed increase have yet to be confirmed. Recently, the company's stock price center is 7 yuan, and it is expected that there will still be room for continued growth in future fixed increases in issuance. In September 2016, the company participated in the Poly Technology Defense Equity Investment Center (Poly Technology for short) in the form of an LP and pledged capital of 200 million yuan, accounting for about 10% of the total fund size. As the funder of Poly Technology, the company and Poly Defense Investment are expected to achieve comprehensive resource sharing and strategic cooperation. This fixed increase is only a small stage in the in-depth cooperation process. The company increased the fixed increase lock period from 1 year to 3 years, which is also a side reflection of long-term and in-depth cooperation. Judging from the shareholder background of Poly Defense Investment, whether it is a pure military business or a civil-military integration project, Poly Defense Investment has an investment advantage. In particular, through this cooperation, we have seen the company's intention to build a military industry chain, and use Poly Defense Investment's investment experience and resource accumulation to walk with the strong. Therefore, we believe that the company's military business sector faces a wider investment space and is expected to enrich the military business product line. We believe that the pace of cooperation between the company and Poly Department is very fast, which shows that both sides have strong optimism about the prospects of cooperation. At the same time, through leveraging effects, the company can enjoy the expansion of business scope and scale effects brought about by Poly Technology's 2 billion yuan investment fund, which will effectively expand the company's military sector layout vision and ability to allocate resources. Another important point worth paying attention to is that all of the company's fixed capital raised is invested in the military sector, not involving investment in the real estate sector. There is a marked difference between the fixed amount of capital raised and invested in real estate projects by other real estate companies. It is a “one matter, one discussion” situation, so we are optimistic that the company's fixed increase will be approved. 2. The two major sectors collaborate to promote valuation increases: the real estate sector provides fundamental support, and the military sector provides topics to boost stock prices. This cooperation has brought the company's main business into the field of national defense and military industry, and will provide a platform for resource integration for the company's overall “big military” strategy. Specifically: (1) Rapid growth in real estate sector performance. According to Kerry data, the company's sales in 2016 were 22.6 billion yuan. Considering the company's current land reserve city layout upgrade and total volume growth, as well as the internal requirements of the equity incentive plan, the company's sales revenue in 2017 and 2018 is expected to remain high. We are optimistic about the company's entire product line and good cost control capabilities, and believe that the company is expected to enter the 30 billion tier in 2017. It is worth noting that Poly defense investment may bring in overseas defense base construction business, which will have a profound impact on the company's real estate business sector, prompting the company's entire business sector to “get involved in the military.” (2) The future of the military sector is clear. The military goods sector mainly includes two sectors: military vehicles and exoskeleton robots: in the early stages of the exoskeleton project, the state invests in the military, the company is industrializing, and the huge military and civilian markets will guarantee the high margin characteristics of the products; the military vehicle sector currently has insufficient production capacity, and there is an urgent need for constant capital injection to expand production capacity and increase the scale of production capacity. According to the expectations of the fixed increase plan, a large amount of performance in the military vehicle and exoskeleton robot businesses was released in 2018, thus establishing the status that 2018 will become the “first year of military business”. Judging from the current fixed increase progress and the military sector's R&D process, the company's fixed increase in the second half of the year, and the military industry business will likely increase capital in the military industry business, and an explosion in the military business in 2018 can be expected. 3. The company launched an equity incentive plan to promote growth. The company announced a list of restricted stock grants on September 8, 2016, covering 158 management and core employees. The plan not only takes into account the incentives of current executives, but also reserves sufficient incentive space for those entering the list in the future. At the same time, it is worth noting that the restricted stocks included in the incentive plan account for 3.79% of the company's total share capital at the present time. The scope of this incentive plan is wide and strong enough to show the company's determination to pay sufficient costs to motivate management and core employees. At the same time, the growth rate of the company's 2016-2018 three-year performance is not less than 10%, 20%, and 30% compared to the 2013-2015 average performance of 348 million yuan. According to the company's pre-disclosed 2016 performance growth range of 60%-80%, which greatly exceeds equity incentive requirements, we are optimistic about the rapid growth in the company's 2016-2018 performance. 4. Risk warning: Sales fall short of expectations, fixed increases and adjustments, and further tightening of industry policies. Conclusion: The company is a regional brand housing enterprise deeply involved in Chongqing, and is also a leader in the special vehicle industry. Starting in 2016, it will enter a period of rapid expansion, especially as the company's military sector starts production and real estate projects enter the settlement cycle, which will significantly increase the company's profit and valuation level. We expect the company's operating income from 2016 to 2018 to be 11 billion yuan, 14.5 billion yuan and 18.4 billion yuan respectively; earnings per share are 0.34 yuan, 0.49 yuan and 0.62 yuan respectively, corresponding to PE 21.19, 14.73 and 11.5, respectively. Not counting the military sector, the company's NAV was discounted by 3% to support the company's performance. We gave the company a target price of 12 yuan for 6 months to maintain the company's “highly recommended” rating.