Investment highlights: Event: November 8, 2016, the company announced the “Report on Major Asset Replacement and Issuance of Shares to Purchase Assets and Raise Supporting Funds and Related Transactions (Draft)”. The major asset restructuring plan was released, and the main business was to transform the securities business. The listed company announced a major asset restructuring plan. 1) Major asset replacement: It is proposed to replace the real estate development business held by the company with an equivalent portion of 66% of Huaxin Securities held by Yidian Group. 2) Issuance of shares to purchase assets: At an issue price of 9.59 yuan/share, it is proposed to issue 272 million shares to Yidian Group to purchase the difference between the transaction price of invested assets and expenditure assets, to Feilo Audio to issue 134 million shares to purchase 24% of Huaxin Securities, and 11 million shares to Shanghai Beiling to purchase 2% of Huaxin Securities. 3) Raising supporting capital: At an issue price of 1,060 yuan/share, it is planned to issue 220 million shares, 60 million shares, and 0.4 billion shares of active management products of Yidian Group, Guosheng Assets, and China Taibao Stock, respectively, to raise 1,242 billion yuan in supporting capital, mainly to supplement the capital of Huaxin Securities. Huaxin Securities is actively deploying throughout the country, implementing traditions and innovative development. As a comprehensive securities company, Huaxin Securities covers all traditional business types of securities companies and actively expands business outlets. Within 3 years, it has rapidly expanded from the original 21 business outlets to 60, covering 18 provinces, autonomous regions and municipalities directly under the Central Government, distributed in more than 40 large and medium-sized cities, and has basically completed the national strategic layout. At the same time, it is committed to business diversification and innovative development, and engages in futures business, alternative investment business, direct investment business, etc. through its wholly-owned subsidiaries. The value of injected assets is underestimated, and there is plenty of room for improvement. The corresponding valuation of 100% of Huaxin Securities's shares injected into this asset restructuring was 5.35 billion yuan. In 2016, the PB of small brokerage firms in the industry was 3.16 to 4.26 times, with an average PB of 3.71 times. Considering that Huaxin Securities's current net assets and profit scale are smaller than the current smallest A-share brokerage firm, and that there is more room for rapid future expansion and growth, Huaxin Securities was given a small premium based on an average of 3.71 times PB for small brokerage firms, and a PB valuation of 3.88 times in 2016, with a corresponding market value of 13 billion yuan. The net asset value of the company's retained assets is 1,582 billion yuan, which is 2.0 times the PB valuation of retained assets. The corresponding market value of retained assets is about 3.2 billion yuan. In addition, the supporting financing of 1,272 billion yuan was used to increase the registered capital of Huaxin Securities. Considering the future increase in net assets, the valuation was also based on 3.88 times PE, with a corresponding market value of 4.9 billion yuan. Considering the repeated calculation of the value of 8% of Huaxin Securities's shares, this part of the valuation calculation method is Huaxin Securities's net assets* 8% * 2 times PB, which is 500 million yuan. A comprehensive calculation shows that the total valuation of Huaxin shares is 20.5 billion yuan. Investment advice: China is in an era of major financial development, and the securities industry is also in a period of booming development. Huaxin Securities, a subsidiary of the company, is currently still small in size. After increasing capital, the business is expected to expand rapidly, which is worth looking forward to. We predict that the total valuation of Huaxin shares will be 20.5 billion yuan. Based on the total share capital of 1,061 million shares after the restructuring is completed (considering supporting financing), the corresponding target stock price is 19.36 yuan/share. The company's suspended trading price on August 24, 2016 was 11.93 yuan/share. The target stock price had 62% margin compared to the suspended price, giving it a “buy” rating. Risk warning: The company's asset restructuring falls short of expectations.