Key investment points: Leading domestic supplier of bridge container cranes, increasing the share of stainless steel business. Huadong Heavy Machinery was founded in 2004, formerly known as the Wuxi Huadong Heavy Machinery Factory, and listed on the Shenzhen Stock Exchange in 2012. It is mainly engaged in R&D, production, installation and sales of container handling equipment such as rail cranes and shore bridges, as well as in the stainless steel sector, which mainly focuses on trade. The company has been deeply involved in the field of container handling equipment for many years, has rich experience, and is a leading enterprise in container cranes. Since entering the stainless steel business in 2015, it has gradually become the company's profit growth point. In 2016, the company's main business, stainless steel coil trade, stainless steel furnace materials, and container handling equipment, accounted for 66%, 19.71%, and 14.29% of revenue, respectively. Investment in water transport has improved marginally, and investment in container lifting is expected to gradually recover. As the main component of fixed waterway investment, port fixed investment directly affects the company's container handling business. China's waterway investment and construction entered a period of decline after reaching its peak in '11, and improved to a certain extent in '15. Currently, driven by policies such as the “Belt and Road” and the “Yangtze River Economic Belt”, port infrastructure construction continues to grow, which is expected to bring new opportunities for the company's development. The acquisition of Runxing Technology entered the field of high-end intelligent equipment manufacturing and achieved secondary growth. In May 2017, Huadong Heavy Machinery plans to acquire 100% of Runxing Technology's shares by issuing shares and cash at a price of 2.95 billion yuan. Runxing Technology has strong comprehensive strength and high market recognition in the domestic CNC industry. If this transaction is completed, the company will quickly enter the field of high-end CNC machine tool manufacturing, expand the scale and level of business in the field of high-end equipment manufacturing, and integrate the company's business and resources. At the same time, through the acquisition, Huadong Heavy Machinery will transform from a container crane supplier to an intelligent manufacturing equipment service provider, promoting the rapid development of the company. Demand for CNC processing equipment in the downstream consumer electronics industry is strong, and Runxing is expected to benefit the most. Runxing Technology was founded in 2007. Its core product, the drilling processing center (CNC), is mainly used for the processing of precision metal structural parts for 3C products. In recent years, the penetration rate of metal cases for downstream consumer electronics products, especially smart phones, has continued to rise, leading to a rapid increase in demand for equipment such as drilling and processing centers. We expect CNC equipment to usher in a boom period of 1-2 years. As the leading supplier of CNC equipment in China, Runxing Technology has sufficient orders and will become one of the biggest beneficiaries. Future development should not be underestimated. Profit forecasting and valuation. Assuming that this acquisition proceeds smoothly, Runxing Technology's business is consolidated starting in 2017 Q4. The payment consideration for issuing shares and raising supporting financing shares are all at 8.88 yuan/share, for a total of 375 million shares issued, and the total share capital reached 1,064 million shares after issuance. We forecast that the company's net profit for 2017-2019 will be 123 million yuan, 439 million yuan and 514 million yuan respectively, and EPS will be 0.12 yuan, 0.41 yuan and 0.48 yuan respectively. Considering that Runxing has good growth potential, we gave the company 25 times PE in 2018, with a target price of 10.25 yuan. For the first time coverage, we gave it a “buy” rating. Risk warning. Macroeconomic downturn; the acquisition of Runxing Technology failed; CNC equipment sales fell short of expectations.