Incident: The company released its three-quarter report on the evening of October 28. Revenue for the first three quarters of 2016 was 638 million yuan, down 3.64% from the same period of the previous year; net profit attributable to owners of the parent company was 9.2034 million yuan, a decrease of 58.38% over the same period of the previous year; and the comprehensive gross profit margin was 12.98%, up 0.14 percentage points from the same period last year. Comment: Performance declined sharply due to restructuring costs, and the registration of industrial and commercial changes was completed to open a new route. Affected by the macroeconomic and retail environment, revenue from the home appliance business fell 3.64% in the first three quarters; net profit fell 58.38% due to an increase in early restructuring expenses. However, it is expected that listed companies will completely divest the home appliance business before the end of the year, so the impact of the decline in the home appliance business can be ignored. At the same time, the listed company has completed the commercial registration and transfer of Dejing Electronics, so its business will be transformed into a secure encrypted mobile phone business. The secure and encrypted mobile phone industry will take off quickly. We judge that the market space for demand for secure encrypted phones in the special industry alone is over 30 billion dollars. If the commercial market is taken into account, the market space is likely to double. Previously, there were three reasons why industry-related companies and product drivers were unable to rapidly expand the market: national demand was not implemented, there were no nationally produced secure encryption products, and no effective industrial alliances were found to promote it together. However, we judge that all three factors are now mature, and the secure and encrypted mobile phone industry will take off quickly. An encrypted mobile phone industry alliance has been formed with top companies in the industry, and Dejing's future performance is flexible. Dejing has formed a strategic alliance with Zhanxin, Zhongke Hongba, and Yuanxin Technology. At the same time, as Zhanxin's sole partner in the field of secure mobile phones, Dejing is responsible for project development and process design as a core member. The company has now received some orders from aerospace science and engineering, and the 1.4G private network mobile terminal project currently being laid out, the public-grade smartphone project in cooperation with Defender Connect, and the public security system project are all expected to be launched quickly in the future. Since the profit margin of secure encrypted phones is much higher than that of ordinary phones, we believe that Dejing's performance will be very flexible in the future. We are optimistic about the company's subsequent development and maintain the “Highly Recommended - A” rating. We expect the net profit of the Sanlian Home Appliance Business for 16-18 to be 2364.25/2387.29/249.17,400 yuan, corresponding to the 16-18 EPS of 0.09/0.09/0.10 yuan. Considering the merger and acquisition of Dejing Electronics, we expect net profit of 94 million, 124 million, and 205 million yuan, respectively, corresponding EPS of 0.37 yuan, 0.49 yuan, and 0.81 yuan. The current stock price of 19.28 yuan corresponds to 52 times, 39 times, and 24 times PE in 16-18, maintaining a “Highly Recommended - A” rating. Risk warning: The promotion of secure encrypted phones falls short of expectations; the market is a systemic risk.