Key investment points: Acquire Shikai Technology to strongly transform the military industry. Euroka acquired 100% of Shikai Technology's shares through a combination of issuing shares (accounting for 86% of the total transaction price) and payment of cash (accounting for 14% of the total transaction price), and raised no more than 180 million yuan in supporting capital. The transaction price of Shikai Technology is 750 million yuan, and the purchase price of assets is 6.33 yuan/share. In October 2016, Shikai Technology completed the equity change. Shikai Technology's main business is R&D, integration and production of optoelectronic technology in military weapons and equipment. Its main products are missile guidance systems that perform precise attacks on mobile targets (tanks, ships, helicopters, etc.), including mobile guidance systems, handheld guidance systems, and related spare parts. The main products have already been finalized and installed. Shikai Technology has many years of experience and technology accumulation in the field of anti-tank missile guidance systems. Meanwhile, Euroka seized the country's strategic opportunity to implement civil-military integration and jointly funded the establishment of a civil-military integration industry fund with Lu Xin Venture Capital. The establishment of this fund will help Yuroka discover and cultivate high-quality military projects and accelerate the expansion and strengthening of the military industry. The downturn in the coal industry has had a major impact on the company's traditional main business. Euroka's traditional coal mine safety business has continued to decline since 2013. Revenue in 2015 was only 68 million yuan, a year-on-year decline of 43%. The first three quarters of 2016 achieved operating income of 33.1469 million yuan, net profit of net income of 7.1749 million yuan, and an increasing trend in losses. In the third quarter of 2016, China's coal prices rose markedly, and the imbalance between supply and demand in the market was eased, but there is still great uncertainty about the prospects for industry recovery. In order to cope with the risk of falling demand, Euroka proposed a dual transformation strategy of “product transformation and industry transformation” in due course. Industry transformation refers to parent companies using capital markets to transform to the military industry and subsidiaries to develop rail transit informatization services; product transformation is reflected in the development of mine rail transit products and railway set-top box products. The subsidiary Fuhua Yuqi is progressing smoothly in exploring the non-coal sector. Fuhua Yuqi, a subsidiary of Euroca Holdings, was originally engaged in the development and production of mining communications (underground communications for coal mines) products. In order to cope with the impact of the downturn in the coal industry on performance, Fuhua Yuqi used its accumulated technical advantages in the field of communications to actively lay out new businesses such as traffic data integration, big data, and rail transit set-top box products. According to Fuhua Yuqi's revenue structure in 2015, the company's non-coal mining business revenue accounted for more than 75% of total revenue. In the first half of 2016, Fuhua Yuqi achieved operating income of 25.3528 million yuan and net profit of 1,6842 million yuan. We are optimistic about Fuhua Yuqi's expansion prospects in the field of transportation big data applications. In particular, railway system integration and railway set-top box products are expected to become additional profit points for the company. Profit forecasts and investment advice. Regardless of the increase in performance brought about by the merger and acquisition of Shikai Technology, Euroka's EPS from 2016 to 2018 is expected to be 0.03, 0.04, and 0.04 yuan/share, respectively. Considering the impact of increased performance and stock capital dilution brought about by the merger and acquisition of Euroka, Euroka is expected to prepare for the 2016 and 2017 EPS exams at 0.11 and 0.13 yuan/share, respectively. Referring to comparable company valuations, Euroka was given a valuation of 107 times in 2017, corresponding to the target price of 13.91 yuan, covering Euroca's “buy” rating for the first time. Risk warning. The coal market continues; the expansion of the military industry falls short of expectations.