Main opinion 1. Benefiting from the good performance of the new business, the company's revenue and profit both rose, and there was a marked increase in revenue in the first half of 2016, mainly due to the effectiveness of the company's transformation. The parent company transformed the product coal mine intelligent and safe transportation system, sold 2 sets, and achieved revenue of 5.4814 million yuan. At the same time, the industry is transforming businesses such as rail transit wireless communication and railway big data integration. In the first half of the year, there was a significant increase in orders for Prime bus set-top box products and revenue. The company's major businesses include coal mine roof monitoring systems and related instruments. Revenue from industrial communication products and underground safety transportation systems in coal mines has increased dramatically, and gross margin has increased slightly. Among them, the gross margin of coal mine roof monitoring systems and related instruments remains high at 73%. In terms of three fees, the company's sales expense ratio fell from 33.6% to 17.5%, and the management expense ratio fell from 51.5% to 43.8%. The financial costs had a relatively small impact. The main reason for the large decline in rates is that the company has increased the collection of accounts receivable, classified traditional mining monitoring customers, and retained high-quality customers with better repayment. The rest of the users paid first and then paid later to ensure the safety of payment. 2. In response to the current sluggish state of the coal industry, the company actively promoted product transformation and controlled financial risks. In the first half of 2016, China's coal supply-side structural reforms began to bear initial results. As coal production gradually declined, the imbalance between supply and demand in the market was alleviated, and business conditions improved to a certain extent. However, the coal industry is still affected by multiple factors such as overcapacity, environmental protection, and new energy, and recovery is weak. Although coal prices have risen slightly recently under the influence of supply-side reform policies, it is uncertain that the industry has begun to recover, and uncertainty is still increasing. In response to the severe industry situation, on the one hand, flexible demand products such as coal mine safety monitoring have been transformed into rigid demand products such as intelligent mine transportation systems, etc., new products have now been put on the market; on the other hand, the company has adopted measures to increase cash sales and reduce credit sales for product sales, and has increased the recovery of accounts receivable, thereby reducing the risk of accounts receivable and ensuring financial security. Currently, the company's industry segment is the coal mine safety monitoring and communication service industry, and this industry is a key industry of “supply-side reforms,” and the country's vigorous implementation will bring hope to the industry's recovery. 3. Rail transit, military industry and other industries have huge potential. External mergers and acquisitions help companies transform their industries, taking into account the continuing downturn in the coal industry. The company is based on strong machining and electronic manufacturing, mergers and acquisitions of Shikai Technology as a starting point, and the military industry fund as an important means to rapidly expand the civil-military integration industry. Recently, the company's plan to acquire Shikai Technology was approved unconditionally. Shikai technology products are mainly used as optical targeting and tracking guidance systems for anti-tank missiles. They are indispensable and important national defense equipment, and corresponding products can maintain an advantageous position over a long period of time. Shikai's profit commitments from '16 to '18 were 60 million, 73 million, and 86 million yuan, respectively, which can significantly increase Euroka's profits. In addition, since 2014, the subsidiary Fuhua Yuqi has been actively deploying railway data network transformation, rail transit, and subway big data projects, creating industry-leading passenger train WIFI network system solutions, and cooperated with international companies to jointly develop big data information platforms for domestic transportation networks. In the first half of this year, Fuhua Yuqi contributed 25.35 million yuan in operating income and 1.68 million yuan in net profit, which has begun to be the main driving factor for the performance of parent company Euroca. 4. The profit forecast predicts that the company will achieve net profit of 52 million yuan, 096 million, and 115 million yuan in 16-18. The corresponding EPS is 0.10 yuan, 0.18 yuan, and 0.21 yuan, and the corresponding PE is 94X, 51X, and 43X. Give recommendations. 5. Risk warning: In the field of traffic signals, the growth rate of the military industry falls short of expectations; the coal industry will remain sluggish for a long time to come.