The performance of the main investment points is in line with expectations, and it is expected that losses will be reversed in the future. In the first half of 2016, the company achieved revenue of 78 million yuan (+683.69% year-on-year), net profit attributable to the parent company of -022 million yuan (-40.04% year-on-year), and achieved an EPS of -0.17 yuan. Affected by the consolidated reports of subsidiary Huayang Communications and Great Wall Digital, the company's operating income rose sharply. The company's performance in the first half of the year continued to be sluggish due to continued delays in domestic finalization of the portable anti-aircraft missile command and control system, which is the company's core business, and the lack of progress in military trade exports. In the second half of the year, the company may make progress in various businesses such as air defense command systems, radar systems, general aviation products, and undersea exploration, and performance may resume growth. A model for popular participation in the military, and future development can be expected. The company is the first private military enterprise in the Chinese capital market. Its main business is R&D, production and technical trade of investigation, command, and control systems centered on continuous wave radar technology and photoelectric detection technology. Currently, the company has been listed for a short time, is small in size, and has a relatively single source of revenue, so profits have fluctuated greatly. However, the company's subsequent development is still promising. From an enterprise level, the company's own technical level is advanced and has a certain first-mover advantage; from the industry level, as a private military enterprise, the company is more flexible in production activities, capital operations, etc., and can better adapt to the complex and changing market environment; at the national level, civil-military integration has been upgraded to a national strategy, and private military enterprises are expected to receive policy support. If the company can make rational use of its advantages and fully grasp the pulse of the times, then it is optimistic about the company's future performance. The autonomous underwater vehicle has passed the inspection, and is expected to become a new bright spot in the future. According to CCTV reports, the company recently cooperated with Northwestern Polytechnical University, a 50-kilogram portable autonomous underwater vehicle, passed the Ministry of Science and Technology's inspection and testing at sea. The product has complete intellectual property rights, obtained 8 national invention patent authorizations, reached international advanced levels of performance, and has industrialization capabilities. In military terms, this product has anti-mine and other functions; in civilian use, it can perform tasks such as seafloor topographic surveys. Domestic demand is strong, and it also has some competitiveness in the international market. It is expected to become a new bright spot for the company's future development. Actively expand business areas, revenue streams, or diversify. Currently, the company only sells a series of portable anti-aircraft missile command system products, with a single source of revenue. This is the main reason for the large fluctuations in the company's performance. To improve the quality of the company's revenue, there is no time to delay expanding its business areas. Looking at the general direction, the company is relying on the advantages of military technology and leveraging the civil-military integration strategy to actively explore civilian markets such as marine exploration and communication electronics. From a product perspective, the company's small autonomous underwater vehicle has passed inspection and is expected to be mass-produced; some type of infrared long-range warning detection system is actively participating in military bidding; and the development of general aviation equipment may benefit from policy dividends. If things go well, the company may break the impasse of a single revenue stream and diversify its sources of performance. Capital operation or deepening, and extension development helps strategic layout. In the past two years, the company has acquired 14.29% of the shares of Lingdong Microelectronics, 60% of Huayang Communications, and 51% of the shares of Great Wall Digital. It hopes to quickly expand its business field through capital management. It is expected that capital operations will continue to deepen in the future, technology integration may accelerate, and the strategic layout is expected to gradually improve. risk factors. The progress of military reform has fallen short of expectations; the company's model bid and delivery have fallen short of expectations. Earnings forecasts, valuations and investment ratings. Considering the possibility that the company's core model will be finalized during the year, we maintain the 2016/17/18 EPS forecast after full dilution at 0.29/0.38/0.53 yuan. The current price is 30.94 yuan, which is 107/81/58 times PE corresponding to 2016/17/18, respectively. Considering that the level of military improvements is in line with expectations, and that the company's model delivery is expected to return to normal in the second half of this year, it will promote the release of performance and maintain the company's “increase in holdings” rating, the target price is 33 yuan.