Matters: The company signed a foreign investment framework agreement to acquire 65% of Newfield International Education Group (“Newfield”) with 107.25 million yuan, and also plans to acquire Shanghai Weile Management Consulting Co., Ltd. (hereinafter referred to as “Shanghai Weile”) and acquire 51% of the shares with 56.1 million yuan (including a capital increase of 22 million yuan and the acquisition of old shares of 34.1 million yuan). The capital required for this acquisition comes from the company's own capital or self-financing. Ping An's view: The traditional main business is growing poorly, and the strategic transformation of the education industry is the education industry: The company is mainly engaged in R&D, design, production and sales of explosion-proof electrical products, and its downstream customers are mainly coal companies. In recent years, the prosperity of the coal industry has declined, the company's downstream demand has slowed, the explosion-proof electrical appliance business has been dragged down to a certain extent, and the company's performance has been affected. The growth of the traditional main business has been weak. In this context, the company actively plans strategic transformation to build the company's second main business. After in-depth research, the company formulated a development strategy for transformation into the education industry, focusing on the international education industry chain, and successively acquired educational targets such as Zhongling Network, Yali Technology, Ledi Technology, Orchid Network, and Newban Culture, and successfully entered the segmented fields of international curriculum training, overseas services, and online education. Strategic acquisition of Newfield to enhance the advantages of study abroad services: Newfield is a well-known brand in the field of study abroad established in 2002. It is a study abroad consulting and overseas training organization officially certified by the Chinese Ministry of Education. It is committed to providing a full range of specialized consulting and training services for Chinese students, actively carrying out international cooperation programs, and introducing high-quality resources from overseas institutions. Newfield is headquartered in Auckland, New Zealand, and has established direct subsidiaries in Sydney, Melbourne, London, and Hangzhou. It has established close cooperative relationships with more than 1,200 famous institutions in more than 20 countries and regions around the world, including the United States, the United Kingdom, and Australia, and has become the official admissions agency authorized by these institutions in China. The company's strategic acquisition of Newfield will enhance its competitive advantage in the study abroad market and be able to enter the huge post-study abroad market, providing more value-added study abroad services for Chinese students. Increase capital to acquire Shanghai Weile to strengthen curriculum development capabilities: Shanghai Weile is an education and training consulting agency founded in 2010, mainly dedicated to providing comprehensive support and services for international courses and K12 education and training. Shanghai Weile has strong curriculum research and development capabilities, and has developed excellent English courses such as “Different Phrases,” “I Love to Remember Words,” and “Grammar as if the mouth hangs over the river.” Currently, Shanghai Weile mainly provides services such as the construction of school curriculum systems and teacher training, and has established good cooperative relationships with hundreds of training sites across the country. In the future, Shanghai Weile will rely on the advantages of independent curriculum research and development, use the cooperation channels of existing training schools and many years of reputation in the industry, and is committed to providing one-stop services for training institutions and parents, providing training institutions with online solutions such as teacher training and output, and daily operation and management of schools, and launching an online education interactive platform for parents of students, including home-school connections, curriculum platforms, and application centers. The acquisition valuation is relatively reasonable, and the growth rate of performance promises is very high: in terms of valuation, Newfield's 65% equity valuation is 107.25 million yuan, PE corresponding to the performance promised in 2016 is 11 times, and the valuation of the remaining 35% equity is initially agreed to be no less than 11 times the net profit in 2018; Shanghai Weile's overall valuation is 11 million yuan, and the performance promise for 2016 is 13.75 times. Judging from the growth rate of performance promises, the growth rate of Newfield's performance promises is high. The promised performance in 2016 was 15 million yuan, up 62.3% year-on-year, while it was agreed that the compound growth rate of the promised performance in 2016-2018 will not be less than 35.8%; Shanghai Weile promised a higher performance growth rate. The promised performance in 2016-2018 was 8 million yuan, 16 million yuan, and 32 million yuan, respectively, with growth rates of 270%, 100%, and 100%, respectively. The case-level market is actively increasing its holdings, and there is full confidence in future development: according to the transaction plan, 40% of Newfield's purchase price is about 42.9 million yuan, and 60% is valued in the form of shares. The company currently pays cash, then directly buys or subscribes for additional shares of listed companies through the branch level market, and needs to be completed by April 12, 2017. 25% of the purchase price of Shanghai Weile was paid in cash, and 75% of the purchase price of about RMB 255.75 million was in the form of shares. The company currently pays cash and then directly buys or subscribes for additional shares in listed companies through the subject-level market, and needs to be completed by January 31, 2017. The case-level market directly purchased shares and completed the lifting of the ban in accordance with performance promises, highlighting that Newfield and Shanghai Weile are fully confident in the company's future development prospects, while also providing better compensation and guarantee measures for poor performance expectations. Valuation and investment recommendations: The company's operating income for 2016-2018 is expected to be 760 million yuan, 917 million yuan and 1,052 million yuan respectively, up 43.8%, 20.7% and 14.7%, respectively; net profit is 93 million yuan, 120 million yuan and 144 million yuan, respectively, up 72.4%, 28.9% and 19.2% year on year; EPS is 0.64 yuan, 0.82 yuan and 0.98 yuan respectively, corresponding to the closing price of PE on April 11, 2016, 64.4 times, 49.9 times, and 41.9 times. The company's main business has the ability to grow steadily, epitaxial expansion has led to a significant increase in the company's performance, and strategic transformation education enhances the company's valuation space. The acquisition of Newfield and Shanghai Weile is an important step for the company to strategically lay out the international education industry chain and consolidate the company's competitiveness in overseas study abroad services and international course training. We are optimistic about the layout of the company's international education industry chain and the future growth of the education sector, and maintain a “strong recommendation” with a target price of 48 yuan. Risk warning: Competition in traditional main businesses is intensifying, extension expansion falls short of expectations, risk of merger and acquisition asset integration, risk of performance falling short of expectations, etc.