Incident: Ruiling Co., Ltd. and Germany's Cloos signed a “Project Cooperation Agreement”. The two sides reached an agreement on matters related to the proposed joint development, production and sale of welding products on a global scale. We conducted research on the company yesterday. We believe that this cooperation with Cloos is an important step in the development strategy of Ruiling Co., Ltd. If the cooperation goes well, there may be further development in welding equipment, parts, and complete robot equipment in the future. Comment: 1. Cooperation with Cloos is an important step in the development strategy of Ruiling Co., Ltd. CLOOS is a German company specializing in complete welding equipment. It targets high-end market segments. The three products include welding power supplies (including gas-shielded welding machines and welding guns), compact welding machinery systems, and Romat series industrial robots. This cooperation is of great significance to Ruiling Co., Ltd. A new product developed jointly will be launched in October. Ruiling has been recognized by German companies in terms of product technology, welding power supplies, and site management, etc., which also shows that the two companies are very compatible. Through this cooperation, the company's competitiveness in overseas markets can be further strengthened. Currently, it is very difficult for the “Tianweng” series products, which focus on overseas markets, to enter the European market. On the one hand, cooperative products can enter the European market, and on the other hand, develop the domestic high-end market. In the future, the company's product line will be even richer, and the product range will cover everything from basic to high-end, from low-end manual welding to high-end automated welding, etc., which is of great strategic significance to the company's future development. This jointly developed product is not a robot product; it is general welding equipment, but if the cooperation goes well, it is expected to be extended. For example, the company's welding power supply and other equipment may also be equipped with robots. Welding automation is the development direction of welding equipment. Domestic demand has been strong in recent years, and the scale of related enterprises is very small. In the future, the company will focus on this direction and continuously upgrade welding and automation products. Cloos is both a robot body and a complete automated production line. It has complementary advantages with Ruiling, and there is still plenty of room for future cooperation. 2. The performance in the first quarter was superior to that of the industry and competitors, and the performance growth in the first quarter was relatively good, mainly because of three aspects: refined management, new product promotion strategies, and a relatively low base last year. The company is a dealer system. Downstream demand mainly comes from infrastructure, manufacturing, heavy industry, etc., and is scattered, and this consumption is rising one by one. The macroeconomy was sluggish in the first quarter, but the shipbuilding industry's capacity utilization rate increased, driving demand for welding equipment. In the first quarter of this year, domestic steel companies produced a total of 2,642,700 tons of ship plates, an increase of 714,200 tons over the previous year, an increase of 37%. Furthermore, this year's railway investment also increased. Of course, due to the slowdown in investment growth, the welding equipment industry has not been very good in recent years, but Ruiling has not fought a price war, has always insisted on prices and transaction conditions, and has raised the gross profit margin through refined management. Furthermore, the company's growth is better than that of the industry, which is related to the trend of inverter welders replacing traditional welding machines. Energy-efficient products have been upgraded, and at the same time, the company has reduced manufacturing costs through technological upgrades. Currently, domestic inversions account for about 40%, while foreign countries account for more than 70%. 3. The welding industry fund was established at the beginning of the year, and the company took the first step in its strategy. At the beginning of 2014, the company established a welding industry fund: The company and Shenzhen Xinxin Zhongcheng Investment Co., Ltd. signed the “Strategic Cooperation Investment Intent Agreement” on March 23, 2014. The two parties will jointly initiate the establishment of Shenzhen Ruiling Huixin Welding Industry Fund Management Co., Ltd., with a registered capital of 10 million yuan, of which Ruiling Co., Ltd. invested 4.9 million yuan and held 49% of the shares; Xincheng invested 5.1 million yuan and held 51% of the shares. The main purpose of setting up a M&A fund is to lay out some promising small and medium-sized companies. At the same time, Rui Ling hopes to get support from a professional M&A team. In terms of project decisions, the chairman has 1 vote to veto. After selecting the project, the company subscribes about 10%, and then develops foreign fund products. In this way, the risk of acquisition is reduced. If the company is to be acquired in the future, market pricing will be adopted, which will be decided by the shareholders' meeting. 4. Maintain a strong recommendation rating. After we released the report “Ruiling Shares (300145) - Expanding Welding Automation Cash Adequacy Value Undervaluation” on 4.28, the increase was 25%. This acquisition of German Cloos favors the company's development and also lays the foundation for the future development of the welding automation and robotics industry. Maintain the 2014-2016 EPS performance forecasts of 0.52, 0.63, and 0.76 yuan. The dynamic price-earnings ratio in 2014 was 25 times. Considering 1 billion dollars in monetary capital, the current valuation is far below the average valuation of robot-related companies (about 35 times). The company has good cash flow, a steady business style, and remains highly recommended, with a target price of 18 yuan.