Key investment event description The company signed an “Equity Transfer Agreement” with Falson Group Co., Ltd. to sell all 100% of the shares of Jiangsu Falson Special Steel Products Co., Ltd. for 190 million yuan, 264 million yuan and 5 million yuan respectively, all 100% of the shares of Jiangyin Falson Metal Products Co., Ltd., and all 100% of the shares of Jiangsu Falson Metal Cable Sales Co., Ltd., for a total of 459 million yuan. Incident review divested part of the traditional wire rope business and focused on the transformation financing service platform: In 2015, due to the overall weakening of downstream demand in the steel industry, the special steel products company and metal products company, which mainly focus on the steel wire rope business, lost 1,559 million yuan and 127.19 million yuan respectively. Even though the market improved in the first quarter, the performance of the two subsidiaries did not improve significantly. Among them, the performance of the special steel products company in the first quarter even exceeded that of the whole of 2015. The overall operating performance was poor, and there was limited room for traditional asset growth. As of the evaluation benchmark date of December 31, 2015, the assessed net assets of the special steel products company and the metal products company were 230 million yuan and 264 million yuan respectively, with corresponding value-added ratios of 46.43% and 4.61%. At the same time, since the special steel products company withdrew surplus reserves and distributed profit of 0.4 billion yuan to shareholders in 2016, its final assessed value was 190 million yuan. However, not long after the establishment of the cable sales company, the registered capital was actually 5 million yuan and no formal operation began, so the equity transfer price was 5 million yuan of registered capital in place. The estimated net market ratio of the three subsidiaries of the equity transfer this time is 1.12, while the company's current net market ratio is 3.79. Looking at the three assets as a whole, even considering the factors of good liquidity in the secondary market, the valuation of the assets sold this time is not very high, or it may indicate the firm determination of the company to divest traditional loss-making assets. Overall, on the one hand, the equity transfer recovered 459 million yuan of capital, strengthened the company's cash reserves and relieved the pressure on cash flow, and on the other hand, achieved investment income of 47 million yuan. This figure exceeds the company's net profit attributable to the parent company's shareholders of the full year of 2015 of 0.055 million yuan, which will significantly improve the company's operating performance this year. After this transfer and divestment of some of the assets related to steel wire ropes, the company reaped cash flow and will launch a light battle to focus on transforming the financing service platform. Recently, the company plans to acquire 100% of Moshan Factoring's shares with 1.2 billion yuan in cash, demonstrating the company's determination to transform the financing service platform. We look forward to the further implementation of the company's related transformation plans in the later stages. As far as the acquisition of Moshan Factoring is concerned, the company and Hongsheng Group signed a “Performance Compensation Agreement”, promising that Moshan Factoring will achieve net profit not attributable to owners of the parent company of 120 million, 160 million yuan, and 185 million yuan in 2016, 2017, and 2018, while the company deducted non-performance in 2015 only -26 million yuan, so after the acquisition of Moshan Factoring is completed, the company's performance will also be guaranteed. Considering that this equity transfer has increased the company's performance, the company's 2016 and 2017 EPS are expected to be 0.38 yuan and 0.47 yuan respectively, maintaining the “buy” rating.