On July 19, the company issued an announcement to jointly initiate the establishment of the Yaozhiyin Yaoyi Industrial Investment Fund with Shanghai Yaozhi Equity Investment Fund Management Co., Ltd., with a total fund size of no more than 300 million yuan, of which no more than 300 million yuan was pledged by the company, and 1 million yuan was pledged by Yaozhi Fund, all in monetary terms; the fund lasts for 5 years, including an investment period of 3 years and a management and exit period of 2 years. The investment direction of Yaozhiyin Yibin Fund is merger and acquisition projects in the high-end manufacturing sector, including but not limited to high-end manufacturing business such as R&D, design, and production of core components of automotive systems. The analysis points have been consolidated frequently, and the determination of transformation and upgrading is evident: the company has determined the development direction as a “automobile+real estate” two-wheel drive business pattern. Currently, the company's goal is to seek a breakthrough in the field of core automotive components. It plans to acquire 100% of the shares of gas generator manufacturer ARC Group. In addition, Yinyi Group plans to acquire 100% of the shares of Belgian transmission manufacturer Bunge. Through the establishment of an industrial investment fund, the company has expanded the scope of investment from the field of automobile safety to the field of R&D, design and manufacturing of automobile core components, showing the company's strong will to transform and upgrade. Partners have good asset management capabilities, and capital helps accelerate the transformation process: Shanghai Yaozhi Asset Management Center was established in July 2011. It is one of the first private equity asset management institutions in China that specialize in investing in the fixed income market. It has three types of funds: bond, hedge, and income. Cooperation with Yaozhi can give full play to its advantages in fund management and achieve asset preservation and appreciation. More importantly, the company can use the power of capital to gather and integrate industry resources through mergers and acquisitions, improve the industrial chain layout, and further accelerate the company's transformation process through leveraging synergies. Cash flow is sufficient, and follow-up actions are expected to continue: the company's monetary capital in 2015 was 2,276 billion yuan, and the net operating cash flow for the first quarter of 2016 was 520 million yuan. Sufficient cash flow provided a guarantee for this fund establishment. The establishment of an industrial investment fund this time may indicate that the company will continue to move forward, and the future layout is even more worth looking forward to. Investment recommendations Since the specific merger and acquisition process of the company and the group has not yet been completed, we will keep the 2016 EPS0.274 profit forecast unchanged for the time being, corresponding to the current stock price of 46PE, and maintain an increase in holdings rating. The risk suggests that real estate sales fall short of expectations.