Dehao Runda (002005.SZ) is currently the only LED vertically integrated enterprise in China. Originally, the company is one of the top three largest home appliance manufacturers in the world. After recognizing the huge market of the LED energy saving industry, the company resolutely entered the LED industry through mergers and acquisitions and quickly built a relatively complete industrial cluster through a vertical integration strategy. It has now laid out a variety of LED extensions, chips, packaging, applications, and sales channels, and is firmly transforming into the LED industry. The company now holds 27% of NES's shares and is its largest single shareholder. Benefiting from NES Engineering's channel advantages (3000 outlets), it is estimated that it will contribute 1 billion dollars in revenue in 2014. The 4-inch machine's production capacity advantage has been released, and 2014 will usher in an inflection point in performance. The company introduced a group of senior **** technical teams to greatly improve the yield and performance of chips and packaging processes. Our field research revealed that currently 58 MOCVDs have a full operating rate, and chip performance in May exceeded the 100 million yuan mark. In the LED business, it can be subdivided into three sub-businesses: chip/packaging/application. According to our estimates, the LED chip business (including epitaxial films) will benefit from increased lighting demand and capacity utilization, with revenue reaching 1.1 billion in 2014 and challenging 2 billion dollars in 2015. The LED packaging business is gaining strength, adding firewood to operations. As verified by our industry chain, the introduction of the Taiwan team has begun to reap results. Product quality and yield have been greatly improved. The operating rate of 40 sealing lines is at full water level, and revenue in March exceeded 20 million. Under cost control and material cost reduction, we estimate that net interest rates will be in double digits superior to the industry average. Furthermore, since the quality of the company's products has been recognized by the market, and sales through integrated Rexx channels, the monthly production capacity is currently operating at full water level of 100KK and production continues to expand, we estimate that the monthly production capacity will reach 200KK by the end of 2014. The LED business was covered for the first time, giving it a “highly recommended” rating. We expect the company's revenue for 14-15 to be 4.45 billion yuan and 6.32 billion yuan respectively, corresponding EPS to be 0.30 and 0.58 yuan respectively, and the dynamic valuation is 28.0/14.5 times, respectively. Although it is a latecomer in the LED industry, with world-class manufacturing equipment and talents, vertical integration, and a broad domestic demand market within the mainland, we are optimistic about the company's development prospects in the LED lighting era, covering it for the first time, and giving it a “highly recommended” rating. Risk warning: risk of LED penetration not meeting expectations; risk of declining gross margin, etc.