The incident described that in the first half of 2016, Longzhou Co., Ltd. achieved operating income of 946 million yuan, a year-on-year decrease of 7.05%, gross margin increased 0.97 percentage points year-on-year to 16.49%, net profit attributable to the parent company fell 1.96% year on year to 22 million yuan, and EPS was 0.08 yuan. The incident commented on the deterioration of the main passenger transport business and the improvement in gross margin. The company achieved revenue of 946 million yuan in the first half of 2016, a year-on-year decrease of 7.05%. Among them, passenger transport business revenue fell 14.26% due to the impact of the opening of the Hefu High Speed Rail and Ganlong Railway, which was the main reason for the decline in total revenue. At the same time, the gross margin of the automobile and parts sales and maintenance business, which accounts for a relatively large share of revenue (47%), increased by 2.57 percentage points, driving the overall gross margin increase of 0.97 percentage points to 16.49%. In the end, the company achieved net profit attributable to the parent company in the first half of the year to 22 million yuan, a year-on-year decrease of 1.96%. The decline in attributable net profit was mainly due to an increase in sales expenses and management expenses in the face of a slight decline in gross profit. Actively develop derivative business and achieve a cross-industry chain layout. The company's traditional main business is automobile passenger transportation and freight logistics as its dual core, but revenue growth has been blocked due to the influence of alternative means of transportation such as high-speed rail, so the company actively promotes business transformation: on the one hand, it vigorously develops derivative businesses such as automobile and parts sales, maintenance, and oil sales; on the other hand, it acquires high-quality logistics targets from abroad to achieve a cross-industry chain layout. Zhaohua Leading, which the company plans to acquire this time, is an enterprise that combines special asphalt container trade services, modified asphalt processing, substrates and modified asphalt storage and sales. It is compatible with the original logistics business of Longzhou Co., Ltd. to achieve collaborative development. The target company's revenue growth has been steady, and the profit increase has been considerable. Zhaohua leads steady revenue growth and excellent profitability: In 2015, Zhaohua Leading achieved operating income of 1.4 billion yuan, an increase of 27.7% over the previous year, and attributable net profit of 52.54 million yuan. With the completion of the acquisition, the company's profitability will be greatly enhanced (Longzhou Co., Ltd.'s revenue in 2015 was 2,462 million, net profit attributable to 44.78 million). Furthermore, Zhaohua Investment and Zhaohua Wealth Promise Promise Company's actual net profit for 2016-2018 was not less than 85 million yuan, 105 million yuan, and 125 million yuan respectively, increasing the company's safety margin. Give it an “Overweight” rating. The company's future prospects: 1) The company's derivative business, such as automobile and parts sales and maintenance business, continues to develop, increasing the company's net profit; 2) If Zhaohua leads the completion of the acquisition, it will become a new profit growth point for the company and provide a driving force for growth. We expect that the company's 2016-2018 EPS will be 0.39 yuan, 0.39 yuan, and 0.51 yuan, respectively, and the corresponding PE will be 34 times, 34 times, and 26 times, giving it an “increase in holdings” rating. Risk warning: The acquisition plan fell short of expectations, and the main passenger and freight industry continued to deteriorate