Incident: The company announced on October 9 that it has signed investment agreements with Shanghai Shipping Industry Fund Management Co., Ltd., Guangzhou Financial Holding Group Co., Ltd., and Yuye Group Co., Ltd. to establish Shanghai Guotai Junan Haojing Investment Management Co., Ltd. The registered capital of the investment management company is 10 million yuan, of which the company invests 3 million yuan in cash, accounting for 30% of the registered capital. Key investment points Transformation is accelerating in the context of traditional business bottlenecks: Affected by industry prosperity, the company's stand-alone water heaters and solar hot water engineering systems declined by 27.37% and 12.46% respectively in the first half of the year, which became the main reason for dragging down the company's performance. Transformation has always been the main line of the company's development. The company's sales of water purifier products reached 126 million yuan in the first half of the year, a sharp increase of 106.48% over the previous year. The channel advantages of more than 10 million hot water heater stock customers and more than 3,000 first-tier dealers make it easy to open up the market. The purchase of 10,000 Changan Motors allows integrated post-sales services to reach deep into third- and fourth-tier cities, counties, towns, and villages. The “I am a singer” advertising effect is obvious. Direct e-commerce platforms have further opened up space, and product transformation is beginning to bear fruit. Sufficient cash reserves provide strong expectations of extension: the company currently has cash and other current assets totaling about 2.6 billion yuan, providing sufficient guarantees for future investment and business expansion. The company currently has four investment companies (Helios and Haojing registered capital of 200 million yuan), Beijing Helios Investment Co., Ltd., Shanghai Haojing Investment Co., Ltd., Silicon Valley Chuanglan American Investment Holding Company, and Shanghai Bangming Kexing Investment Center (limited partnership). Benefiting from Guotai Junan's first-level market background resources: The Shanghai Shipping Industry Fund, the majority shareholder of the investment company established by the investment company this time, is Guotai Junan's core capital management and investment platform, and the chairman of Guotai Junan is also the chairman of Guotai Junan. It is expected that the company will directly benefit from Guotai Junan's project resources and investment management capabilities in the first-tier market, further enhance the scope of the company's expansion with on-hand capital advantages, and facilitate diversified transformation. The new fund-raising project progressed in an orderly manner: the company changed the capital raised for the original solar water heater construction project to: 1) the building-integrated solar water heater project; 2) the high-efficiency reverse osmosis water purifier project; 3) the Southern Base Thermal Energy Project - Air Energy Sub-Project. At present, the project is in the construction period, and more than 1/3 of the capital has been invested, and 152 million yuan has been invested in the air energy project. Increased production capacity will bring more room for new business. Profit forecast and valuation: We forecast 2015-2017 net profit of 1.96, 2.11, and 263 million yuan, and EPS of 0.25, 0.26, and 0.33 yuan, corresponding to PE 36.80, 35.38, and 27.88 times. Actively optimistic about the company's transformation determination and results, and maintain a “buy” rating. Risk warning: Product sales fell short of expectations, and the decline in the solar hot water industry fell short of expectations.