Announcement summary 1. The company issued an announcement that Mr. Sun Jiexiao, the controlling shareholder and actual controller of the company, and his co-actors terminated the holdings reduction plan and promised not to reduce their holdings within 12 months. 2. According to the company's 2016 three-quarter report, revenue for the first three quarters was 1,798 billion yuan, up 31.67% year on year, and net profit attributable to listed companies was 134 million yuan, up 10.4% year on year. The company expects its net profit for the year to be 163-217 million, an increase of -10% to 20% over the previous year. First in business analysis, the chairman terminated his commitment to reduce holdings and clarified confidence in development. Mr. Sun Jiexiao, the company's chairman, controlling shareholder, and actual controller, stated that in order to promote the company's continuous, stable and healthy development and protect the interests of the company's shareholders, especially the majority of small and medium-sized shareholders, it was decided to terminate the above share holdings reduction plan based on confidence in the company's future development prospects and judgment on current stock price trends. Currently, Mr. Sun and his co-actor, Ms. Yuan Jing, hold a total of 492 million shares of the company (including 8.76 million shares held through the “Donghai Ruijing-Pudong Development Bank-Ruiying No. 2 Special Asset Management Plan”), accounting for 48.59% of the company's total share capital. Among them, 166 million shares were tradable shares with unlimited conditions of sale, accounting for 16.37% of the company's total share capital; 326 million shares were tradable shares with limited conditions of sale, accounting for 32.22% of the company's total share capital. Second, drastically increase capital investment and increase expenses in the short term to prepare for future expansion of consumer electronics business. The company recently passed the targeted issuance meeting. It plans to issue no more than 117.66 million shares at a price of not less than 9.54 yuan/shareholder, raising no more than 1.12 billion yuan in total capital. It mainly includes the expansion of production of radio frequency devices for mobile communications and precision structural component projects for intelligent interconnection equipment. As can be seen, the company's capital investment has increased dramatically this year. Using part of its own capital as an initial investment, 5,000 CNC machine tools have been added alone. These additional expenses have increased the company's depreciation and financial expenses by tens of millions this year, but the company has completed certification work for several mainstream consumer electronics manufacturers. The current investment will prepare for mass production of products next year, especially the release of metal exterior parts for consumer electronics. Third, expectations for transformation and development have not changed: since this year, the company has successively acquired two military enterprises, Xi'an Xinghang and Beijing Chiyilong, and added a production base in Huizhou. The company's goals for expanding markets other than communication devices are clear. It is expected that after the additional distribution is completed, it is expected that it will further focus on these industries and expand emerging businesses in an extended manner. The profit adjustment takes into account the increase in expenses brought about by upfront investment in consumer electronics and the slump in gross margin due to its unreleased volume, which led to a slight decrease in the company's overall gross margin, and the increase in depreciation and financial expenses due to large capital expenditure investments. Without considering subsequent potential extended mergers and acquisitions, we adjusted the company to achieve net profit of 205, 3.32, and 461 million yuan in 2016-2018. Assuming that additional shares are added to the diluted share capital at the beginning of 2017, corresponding to 2016-2018 EPS of 0.20, 0.29, 0.41 yuan. Based on the closing price of 10.69 yuan, it corresponds to 52,36,26 times PE. The investment proposal takes into account the company's large capital expenses, and a large amount of potential production capacity is yet to be released next year. After the additional distribution is completed, there is also an opportunity for the company to further expand emerging businesses and maintain the company's “buy” rating. Maintain the target price of 14-15 yuan.