1. Overview of the incident The company issued an announcement on December 1, the “2015 Non-public Stock Issuance Plan”. It plans to privately issue no more than 40.2955 million shares and raise no more than 60 million yuan in total capital for the “898 Innovation Industrial Park” project. 2. Analyze and judge active transformation, and use mass innovation to open up growth space. The company mainly relies on domestic power grids, especially UHV power grid construction. Although UHV power grid construction has maintained a steady growth trend in recent years and in the next few years, power grid construction will eventually slow down in the long run, and power equipment companies must proactively transform. Taking advantage of “mass entrepreneurship and mass innovation”, the company sees the huge industry space in China's innovative industrial parks, proactively adjusts the business structure, optimizes the strategic layout, relieves bottlenecks in the company's development, and enhances overall performance and overall competitiveness with the new growth points created by the Innovation Industrial Park. This fundraising plan is another outreach expansion after the company invests in the network to actively transform and embrace the future. The “898 Innovation Park” is positioned as a “898 Innovation Industrial Park” in the central innovation zone as a trifecta of “incubator for startups, accelerator for growing enterprises, and booster for leading enterprises”. Through online and offline innovation spaces, it creates an international “central innovation zone” integrating functions such as scientific and technological innovation, cultural creativity, and financial services. It is a comprehensive industrial base for innovative and entrepreneurial enterprises to work and exchange with resources from around the world through international exhibitions and other exchange activities. At the same time, industrial parks can use the conditions of their own venues to gather and integrate domestic and foreign exhibition resources, use the advantages of Internet platforms to host independent brand exhibitions, sell various domestic and foreign exhibitions as agents, and provide a full range of supporting services. The Innovation Park is located around the 798 Art Zone and has geographical and location advantages, cooperation and support from scientific research institutions such as Peking University Guanghua, and is also supported by capital and supporting financial services. The price of the fund-raising project is reasonable, and the additional price provides a safety margin of 600 million yuan. We assume that all will be used to rent 50,000 square meters of Beijing Northeast Fourth Ring Road housing for 20 years, equivalent to 1.64 yuan per square meter per day. Although the specific lease contract is undecided, considering the surrounding 798 art district's rent of about 8 yuan per square meter per day and one of the company's proposed non-public offering targets is the actual controller of Zhengyuan Storage, we believe that the proposed non-public offering price is 1,489 yuan/share, which is expected to provide a certain margin of safety for the stock price. 3. Profit forecast and investment suggestions: We believe that the company is the main manufacturer of high-end electromagnetic wires in China. Under steady growth and investment in power grid construction accelerates in the short term, market demand for transformers and reactors will increase, and the company's main business revenue will grow steadily; we are optimistic that innovation parks will improve their performance space in the long term. Since this announcement plan has not yet been approved, changes in share capital and the performance contribution of the 898 Innovation Park are not yet taken into account. The company's 15-17 EPS is expected to be 0.05, 0.08, and 0.14 yuan, respectively, and the corresponding PE is 375X, 227X, and 121X, respectively, maintaining a “careful recommendation” rating. 4. Risk Warning: 1) Innovation Industrial Park development falls short of expectations; 2) Innovation industry policies have changed.