The merger and acquisition of Shikai Technology has great potential to actively promote business transformation. Based on the situation where the coal industry is sluggish, the country encourages the development of military industry, and calls for “civil-military integration”, EUROCA has formulated an “industry transformation and product transformation” development strategy based on the current situation of the company, and determined the military industry's transformation direction for the company. According to the announcement, the merger and acquisition of 100% of the shares of the military enterprise Shikai Technology has been completed, a civil-military integration industry fund has been set up, and substantial steps have been taken to transform the national defense and military industry. Shikai Technology is a national high-tech enterprise. Its main business is the R&D, integration and production of optoelectronic technology for military weapons and equipment. The main products include anti-tank missiles, laser accelerators, and missile receivers, which have already been installed and sold on a large scale; military products under development include portable anti-tank systems and high-precision fire control systems for armored vehicles. The company has strong profitability and is expected to have a long-term leading edge in China. The announcement shows that the subsidiary Shikai Technology promised to deduct 60 million yuan, 73 million yuan, and 86 million yuan in non-net profit from 2016 to 2018. The company will continue to benefit from civil-military integration, and its profitability will increase significantly. Rail transit informatization and big data platforms have been laid out, and rail transit informatization is developing well: The announcement shows that the company's holding subsidiary, Fuhuayuqi, is actively laying out rail transit informatization and big data platform business, and has now made good progress: in 2015, the company increased its investment in the railway set-top box market. Through cooperation with Hangmei Group and Meizheng Company, it has successively signed supply contracts for general speed train set-top boxes at various road stations across the country, including the Shanghai Bureau, the Xinjiang Bureau, Jinan Bureau, and Hohe Bureau, bringing great economic benefits to the company. The announcement revealed that in 2015, Fuhua Yuqi ranked first in the domestic WIFI market for regular trains, and successfully developed high-speed rail WIFI. We predict that the company will form sales on high-speed rail in 2017, generate new profit growth points, continue to benefit from the popularity of railway WIFI, and become one of the main drivers of the company's performance. At the same time, Fuhuayuqi is actively investing in the research and development of the Internet of Things and 4G technology. The products under development include the first 10 gigabit ring network in China and a full range of 4G-LTE digital cluster terminal to core products. Taking advantage of supply-side reforms and innovating main business products, the main business is expected to pick up: supply-side reforms in the coal industry have begun to bear fruit this year. According to NDRC data, the raw coal output of enterprises above scale in the first three quarters was 2,556 billion tons, a decrease of 10.5% over the previous year. Coal prices have risen by more than 50%, and the conflict between supply and demand has eased somewhat. According to the announcement, mine rail transportation systems have become the direction of automated development in the coal industry. After thorough verification, the company decided to use mining monorail cranes as a breakthrough to develop and produce mine transport locomotive systems to replace imports. Currently, two models of this system have been produced and finalized, and are beginning to enter coal companies. The company's coal mine underground transportation automation system has independent intellectual property rights to fill the gap in domestic coal mine safety systems, and will grow steadily as coal recovers. We expect the company to take advantage of supply-side reforms and innovate its main business products. The main business will usher in opportunities to recover and drive the company's performance growth. Investment advice: Buy-A investment rating, 6-month target price of 13.66 yuan. We expect the company's 2016 to 2018 EPS will be 0.09, 0.17, and 0.23, respectively, and the corresponding PE will be 104.0, 54.8, and 40.2, respectively. Risk warning: Market demand falls short of expectations and integration falls short of expectations.