We estimate that the EPS of the company from 2016 to 2018 is 0.05,0.09 and 0.11 yuan respectively, and the corresponding PE is 319,183,149 times. The company's performance declined in the first half of 2016, and with the steady improvement of system integration capability, digital plant business will become the main driver of performance. The progress of the payback of the company's major orders is in line with expectations, and the performance of the participating companies has achieved rapid growth. It was previously announced that 85% of the industrial cleaning system and surface treatment business of the German Dur Group will speed up the company's industrial layout and further enhance the company's overall strength. We are optimistic about its future development, covering it for the first time and giving it a recommended rating. Performance has declined, and digital plant system integration will drive growth: the company reported that the growth of the domestic macroeconomic environment slowed down in the first half of 2016, the scale of investment in fixed assets declined, and the prosperity of the company's industry declined. the company's management actively responded to and made adjustments to control and compress the "smart city business" and further control the risk of the "rubber smart equipment business", resulting in a decline in the company's performance. During the reporting period, the company realized operating income of 98.5645 million yuan, down 57.30% from the same period last year, and realized net profit of 4.3063 million yuan, down 86.38% from the same period last year. During the reporting period, the company invested 16.4405 million yuan in research and development, accounting for 16.68% of revenue, mainly invested in three-dimensional storage and rubber intelligent equipment. From a sub-business point of view, in terms of "electrical automation and integration", business orders declined, with revenue of 50.3525 million yuan, down 21.63% from the same period last year. In terms of "rubber smart equipment", due to the recession in the tire industry, the market demand for molding machines dropped, and related business orders dropped, with revenue of 1.9159 million yuan, down 97.80% from the same period last year. In terms of "digital factory", the company actively expanded the related business of "Logistics Automation Division", achieving revenue of 46.0928 million yuan, down 30.94% from the same period last year, and gross profit margin increased by 9.84% over the same period last year. At present, the company can provide complete solutions for logistics automation systems in many industries. With the enhancement of the company's system integration capability, the gross profit margin of this business sector is expected to maintain an upward trend and become the driving force for the company's performance growth.

The progress of repayment of major orders is in line with expectations, and the performance of the participating companies is growing rapidly: in March 2016, the company and Qingdao soft Control Mechanical and Electrical Engineering Co., Ltd. The automatic Logistics Purchasing contract was signed for the automatic logistics system of Hefei Wanli Tire Co., Ltd., with a contract amount of 108 million yuan. By the end of the reporting period, the total contract price received amounted to 32.25 million yuan, and the progress of repayment was in line with expectations. During the reporting period, the company strengthened the decision-making and management of holding and shareholding companies, and better controlled its investment direction and investment scale. Defoes Precision Machinery, a joint venture with Germany's DVS Group, adhered to the concept of "technology-driven future" and focused on precision motorized spindle products, achieving an income of 6.5994 million yuan, an increase of 46.01% over the same period last year, and a net profit of 104600 yuan, an increase of 173.99% over the same period last year.

The acquisition of German Dur industrial cleaning system and surface treatment business will speed up the industrial layout: on August 6, 2016, the company announced that it intends to acquire 85% of the industrial cleaning system and surface treatment business of German Dur Group. Founded in 1895, Dur Group is the world's leading supplier of machinery and equipment. 60% of its sales revenue comes from the automotive industry, and its products and services cover all important stages of the automotive industry. Doyle Group's industrial cleaning systems and surface treatment operations are operated through the Duer Ecoclean brand and are currently the world's leading provider of industrial cleaning equipment and related solutions. The business is currently estimated to be worth 120 million euros, and the acquisition of 85% of the business will speed up the company's industrial layout, help to make use of Germany's Dur sales channels, quickly expand its business overseas, and further enhance the company's overall strength.

Risk hint: the digital plant system integration business is not as expected, and there are still follow-up approval and integration risks in mergers and acquisitions.