Rapid growth in performance, fighting for the frontier case: ① The company announced its 2016 mid-year report, achieving operating income of 675 million yuan, a year-on-year increase of 160.7%, net profit of 72.887 million yuan, a year-on-year increase of 701.8%, and EPS of 0.11 yuan. In the second quarter, the company achieved revenue of 355 million yuan in a single quarter, an increase of 140.9%, net profit of 43.129 million yuan, an increase of 522.6%; net cash flow from operating activities of 30.1351 million yuan; ② the sharp increase in the company's performance was mainly due to anti-terrorism, public safety, and smart city business growth; ③ The company predicts net profit attributable to listed shareholders from January to September 2016 was 10094.04-111.034 million yuan, up 400-450% year on year. Expense ratios have declined, and overall gross profit has remained at a high level: the company's sales/financial/management expenses for the first half of 2016 were 4689.2/1950.9/94.369 million respectively, up 34.38%/44.85%/104.25% year on year. Among them, the increase in management expenses was mainly due to the merger of the subsidiary CLP Xinlong and Su II. The company's product gross profit margin for the first half of 2016 was 38.31%, including system integration business 30.80%, high and low voltage switchgear business 39.16%, components 45.55%, power electronics 57.35%, security and smart city products 41.06%, leasing and operation 48.97%, service 39.74%, and automation products 44.94%. By business, the company accounted for the top two businesses in the first half of 2016, with system integration revenue of 289.298 million yuan, accounting for 43.09%, high and low voltage switchgear revenue of 2029.67 million yuan, accounting for 30.23%. The company's security, anti-terrorism, and smart city business volume continued to grow rapidly, and the market share is expected to increase further. Furthermore, the company's traditional electrical equipment business was also strengthened after the acquisition of Suzhou Second Development. The fixed increase was approved, the foundation for development was consolidated, and the prosperity of the smart city business increased: on June 23, 2016, the company's non-public stock offering plan met, raising 1.05 billion yuan in capital to invest in anti-terrorist robots, drones, charging piles, and high-speed rail intelligent remote production projects. According to statistics, since September 2015, the company has successively announced smart city (security) orders of nearly 480 million yuan. With the scarce “Top Eight” qualifications of its subsidiary CLP Electric, the company can provide relevant owners with integrated solutions from equipment to operation (there are BOT projects and simple equipment orders). At the same time, the company is focusing on developing a civilian security system closer to the user side, and opening up a new blue ocean in the civil security market through cooperation with local property and security companies to play synergies. Uncertainties in the current international situation are increasing, and the demand for smart cities (security) in mature cities is becoming more and more urgent. The subsidiary CLP Electric Xingfa has been deeply involved in the security field for many years, hoping to develop rapidly along with the boom in the industry. The acquisition of Su II opened a factory to help the development of the main electrical equipment business: the company has the core competitiveness of independently producing components, and the gross margin of the traditional electrical equipment business has remained stable. Although market competition has increased in recent years, the company has actively reduced costs and increased efficiency to ease sales pressure. In October 2015, the company used 294 million yuan in cash to acquire 70% of the shares in the Suzhou Open Factory, and its 2016/2017 exam preparation profit was 0.46/ 53 million yuan. As an advantageous manufacturer of complete electrical appliances, Jiangsu Second Factory strongly supports the franchise, hoping to significantly increase the company's business revenue in the Jiangsu and Zhejiang regions. We expect the traditional business to remain stable throughout the year, and the newly funded intelligent remote (high-speed rail signal) power guarantee system will enable the company to share the dividends of the high-speed rail industry in the future. Taking advantage of the development of new energy vehicles, the charging pile business gradually contributed to performance: the charging pile market ushered in a period of industry acceleration in 2016. The gradual penetration of top-level design policies, the promulgation of uniform industry standards, and the large gap in charging facilities brought about by the rise in new energy vehicles are the three driving factors driving the development of the industry. In the future, charging piles will develop simultaneously with the growth of new energy vehicles, and there is huge market space for charging pile equipment in 2020. The company's charging pile layout covers three types of technology: fast charging/slow charging/wireless charging (technology research and development stage). The “Longxi Company” of Sun Company mainly carries out related business. Currently, orders are being executed one after another. In the future, the launch of the fixed charging pile project production line will drive the company's charging pile revenue to achieve leaps and bounds, which is worth looking forward to. Join hands with world-renowned energy storage companies and wait for the dawn to arrive: the company announced that it will cooperate with ZBB to establish Anhui Meineng Energy Storage (the company holds 42% of the company's shares) to provide zinc-bromide energy storage products. The zinc-bromine liquid flow energy storage battery is one of the mainstream energy storage technologies in the world. It is a high-performance, high-capacity power energy storage system. It has the characteristics of low cost, long life, modularity, safety and environmental protection. It is suitable for large-scale, long-term, and deep charging energy application markets, and has mature business models and successful application cases abroad. Recently, China has successively issued documents to support the development of domestic energy storage. With the advancement of electricity reform, the marketization of electricity prices has become more complete, and the gap between peaks and valleys has further widened. There is still plenty of room for development in the domestic energy storage market, and the relevant layout of the company is expected to be implemented at an accelerated pace. Investment advice: We believe that while the traditional electrical equipment business remains stable, the company has fully benefited from the rapid growth of subsidiaries in the anti-terrorism and security fields. Combined with the performance of charging piles being released one after another starting in 2016, energy storage business losses are expected to narrow. We expect the company's 2016-2018 EPS to be 0.32/0.41/0.48 yuan respectively (without considering additional dilution); giving an investment rating of increased holdings -A, the target price for 6 months is 22.1 yuan. Risk warning: Competition in the electrical equipment and security markets has intensified, and the energy storage business expansion falls short of expectations.