Incident: Junzhi Group (1300 HK) announced that it will raise HK$352.4 million by “allocating old shares before new shares”. The placement price was HK$3.15 per share, about 11.52% off the closing price of HK$3.56 per share on October 8. The shares placed this time account for 11.5% of the company's current issued share capital and 10.31% of the expanded issued share capital through subscription. Use of placement funds: The company will use the proceeds for general working capital and debt repayment. Communications equipment companies often face tight cash flow during the middle of the year, and usually operators make large-scale repayments at the end of the year. Meanwhile, the company's bank loans maturing within one year reached 778 million yuan. Focusing on the development opportunities brought about by the promotion of 4G capital expenditure, the company is actively expanding production capacity and investing in research and development of new products. The allotment financing was in line with expectations. Valuation and target price: The 2013/14/15 profit forecast was adjusted to RMB 0.30/0.36/0.41 to reflect the dilution of share capital; based on the DCF model, the latest target price is HK$3.9, equivalent to 10.4/8.6 times 13/14 PE. The current valuation is approximately 8.9/7.4 times 13/14PE (after dilution). Valuations are still relatively attractive. Maintaining the buying rating: The placement of shares may have a negative impact on stock prices in the short term; however, the company is still one of the 4G investment targets. Placement capital will bring sufficient cash support to the company's operations and an improvement in debt ratios. We believe that the company will directly benefit from the arrival of the 4G investment cycle of domestic operators; in particular, China Mobile is the company's largest customer, contributing more than 50% of revenue. Catalysts: 4G licensing is approaching, operators' execution of 4G capital expenditure is accelerating; 4G poses the risk that performance in the second half of the year will exceed expectations: 4G licensing and operators' 4G capital expenses have been delayed; increased competition has led to higher pressure on ASP than expected