Main points of investment:

The first quarter forecast to turn losses into profits, the full-year performance is good, maintain the buy rating. The company issued a performance forecast to turn losses into profits in the first quarter, and is expected to achieve a net profit of 6.5-7.5 million yuan belonging to shareholders of listed companies. The change in performance in the current period is mainly due to the increase in net profit in the first quarter of the company's wholly-owned subsidiary Zhejiang Lianyi Motor Co., Ltd. compared with the same period last year and related income from the company's disposal of idle real estate. Judging from the net profit in the first quarter, we expect that the performance in the first quarter may be affected by asset impairment or non-recurrent factors, resulting in a lower-than-expected total. however, under the combined effect of the year-on-year increase in net profit of Lianyi Motor, the fixed increase in revenue and purchase of profitable assets such as Ganzhou East Magnetic Field, and the faster-than-expected progress of the fire control simulation training system, we expect the company's annual performance to remain unchanged. Maintain 2016-2018 net profit of 137 million yuan, 225 million yuan, 400 million yuan forecast unchanged, maintain the buy rating.

The non-public offering has been approved and has not yet been completed, and the offering price provides a certain margin of safety for the company's share price. The company intends to purchase its total 100% stake in Ganzhou Dongji by issuing shares from Dongji Co., Ltd. and Hengyi, and to purchase its NdFeB business-related assets (including Yinglohua Import and Export 100% equity) from Hengdian Import and Export. The company plans to raise matching funds from the non-public offering shares of Hengdian Holdings, Kuizhou assets and Silicon Valley Huiyin (Silicon Valley Huiyin No. 1), and the amount of funds raised shall not exceed 100% of the transaction price of this asset. It is intended to be used in fire-fighting robot and fire-fighting training simulation industrialization project, new energy vehicle drive system research and development and industrialization project, high-performance magnet research and development and industrialization project for power motor of new energy vehicle, repayment of interest-bearing debt and replenishment of liquidity. The matching funds raised are issued at a locked price, with an issue price of 10.02 yuan per share, which also provides a certain margin of safety for the company's stock price.

The robot servo motor and control system are progressing smoothly, and there is plenty of room for local procurement in the future. The robot servo motor business cultivated by the company for a long time has successfully entered the supply chain of leading enterprises, and small-scale orders are expected to be obtained in 2017, and there will be a significant increase in orders from 2016 to 2018 as the cooperation deepens. Benefiting from the fact that overseas leading robot enterprises have set up factories in China one after another, the company has a significant cost advantage under the condition of mature technology, and will face a huge alternative space for local procurement in the future. we expect that the size of servo motor orders for a single foreign company may exceed 100 million yuan in the future.

Fire simulation training system market space of more than 15 billion yuan, the company has a first-mover advantage. Relying on the accumulation of data in precision manufacturing and large-scale real scene simulation, many times of cooperation with domestic fire brigades, and a deep understanding of the fire field, the company has undertaken to build the first fire simulation training system in China. The profit model of the fire control simulation training system is rich, which is "total project package income + operation and maintenance income + tour income". At present, only Lianyi Motor is doing it, and the threshold for entry to the market is higher: 1, the simulation training system is a work of art, each is unique; 2, Lianyi Motor pre-emptive registration of patents can raise the entry threshold. Assuming that each of the 291 prefecture-level cities in the country is equipped with a fire control simulation training system, based on the construction income of 50 million yuan for each training system, the market space for project contracting alone is 14.6 billion yuan. We expect the company to complete 2-4 simulated training base projects in the whole year, with a net profit of 15 million-30 million yuan based on 15% net profit.