Overview of the incident The company and Luke Bank signed a “Letter of Intent to Acquire” to acquire 51% of Shanghai Lixin Electric Technology Co., Ltd.'s shares for 172 million yuan; Shanghai Lixin promised that the net profit after tax in 2016-2018 will not be less than 16.5, 2,860, and 41.8 million yuan. If the target company fulfills its performance promises and net profit after tax in 2019 and 2020 is not less than 41.8 million yuan, the company will acquire the remaining 49% of the shares for no more than 225.8 million yuan. Analysis and judgment were used to target a high-quality service provider for NEV drive motor systems through the acquisition of Shanghai Lixin. The drive motor system is one of the core systems of new energy vehicles. Its performance determines the main performance indicators of the vehicle, such as climbing ability, acceleration performance, and maximum speed. Due to the harsh working environment, the drive motor system is generally required to have characteristics such as high impact resistance, stable performance, efficient operation, and easy maintenance, which makes the development and production threshold for drive motors high. Shanghai Lixin was founded in 2011. After years of technology accumulation and accumulation, major customers such as Nanjing Jinlong have permanent magnet synchronous motor control software design capabilities, and have R&D, testing and manufacturing capabilities for pure electric and hybrid vehicle permanent magnet synchronous motors and their drive control systems (currently has 3 related patents); Shanghai Lixin had revenue of 97.035 million yuan, net profit of 9.76 million yuan, and net profit of 2.913 million yuan. 2016Q1 After being acquired by the company, Shanghai Lixin is expected to use the company's financing platform and customer resources to accelerate business development, and future performance is promising. Strengthening the company's NEV motor business capabilities through mergers and acquisitions, and the synergy effect is obvious. The company has always focused on the NEV drive motor business, and the goals are clear. Using its own technology platform, the company has independently developed proprietary technology in motors and control systems, and has obtained a number of new patent authorizations. Small-batch products have been put on the market and recognized by customers; at the same time, it plans to raise 120 million yuan to build a production capacity of 36,000 sets of motors and control systems for new energy vehicles per year. The acquisition of Shanghai Lixin reached a synergy effect with the company's existing technical resource platform, complementing each other's advantages, enhancing the company's core component layout for new energy vehicles, and is expected to enjoy the high growth dividends brought by new energy vehicles. The main business performance is at an inflection point, and the future is optimistic about the layout in the field of new energy vehicles and smart cars. Highlights of the company's future performance: 1) Traditional vehicle regulators and rectifiers continue to achieve product upgrades; 2) automotive high-power diodes are cost-effective, and import substitution is obvious; 3) smart wipers will soon be released, in line with the trend of intelligent automotive electronics; 4) “self-accumulation+fixed increment+epitaxial mergers and acquisitions” layout for electronic control of NEV motors; 5) Establishing an industrial fund to accelerate the layout of smart cars and new energy vehicles through industrial investment. The investment proposal company is a leading domestic intelligent power controller. The strategy is clear. In the future, the main business is import substitution, product upgrades, upstream and downstream expansion, and epitaxial layout of new energy vehicles and smart vehicles, and is optimistic about laying out future development space for emerging businesses. Considering the increase in diluted share capital, it is estimated that EPS for 16-17 will be 0.45 and 0.65 yuan, respectively, maintaining the “buy” rating. Risk: Vehicle sales continue to be sluggish; the company's emerging business layout is progressing less than expected.