On the evening of October 28, Kai Electric released the third quarter results announcement, stating that net profit attributable to owners of the parent company for the first three quarters was 96.914,900 yuan, up 81.02% over the same period of the previous year; revenue was 294 million yuan, up 0.57% from the same period last year; and completed the German Baofu merger and acquisition in the third quarter to achieve full coverage of rail transit electric equipment. The company maintained a “Highly Recommended - A” investment rating of 43.2 and 5.6, corresponding to 16 years of PE and PB, respectively. The subway industry is growing rapidly, which is beneficial to the parent company's business. The 13th Five-Year Plan is expected to invest 3.5-3.8 trillion dollars, an increase of nearly 25-35% over the 12th Five-Year Plan (2.8 trillion yuan), of which infrastructure investment is nearly 3 trillion dollars, an increase of nearly 43% over the “12th Five-Year Plan” (2.1 trillion yuan). Currently, more than 50% of the company's revenue comes from the urban rail and subway industry. Judging from the execution of contracts, the proportion of subway business will rise to more than 70% in the next three years. Revenue entered the peak of confirmation, and new orders increased dramatically in a single quarter. The company achieved revenue of 118 million in Q3, an increase of 29.54% year over year. Beginning in the second half of this year, orders entered a peak delivery period. With the increase in subway investment and the company's expansion efforts in the subway sector, the company added 310 million new orders in a single quarter in Q3 2016 and resumed rapid growth. The merger and acquisition of Germany's Baofu became the leading rail transit electrical equipment leader. After the merger and acquisition is completed, the company's business in the rail transit industry will be derived from secondary power equipment to primary equipment, and the revenue volume will also triple. The company's management team has been working in the rail transit industry for many years, and also has a business partnership with Baofu for more than ten years. They are optimistic about integrating and localizing the company's business and relying on Baofu's global resources to go global. Merger and acquisition proceeds drive the company's performance, and merger and acquisition expenses affect operating profit. During the reporting period, the company's non-recurring profit and loss before income tax was RMB 80.22 million, and the impact on net profit was RMB 68.19 million (after tax). Affected by this, the company's net profit increased by 79.72% during the reporting period. Overseas mergers and acquisitions increased related expenses during the relevant period. The total increase in administrative expenses and financial expenses of about 17.37 million yuan due to intermediary expenses, processing fees for issuing international guarantees, and advance fees for payment of mergers and acquisitions loans was the main reason for the decline in operating profit. The increase in the proportion of the subway business led to a slight decline in comprehensive gross margin, and the accrual of bad accounts receivable due to delays in increasing revenue also had a negative impact on operating profit. Maintain a “Highly Recommended - A” investment rating. The industry is improving, the company layout is reasonable, and the team is excellent. The PE and PB corresponding to 16 years are 43.2 and 5.6 respectively, maintaining the “Highly Recommended - A” investment rating. Risk warning: Rail transit investment falls short of expectations, and merger and acquisition integration falls short of expectations.