Key investment points: Three business patterns have been formed, and performance has increased dramatically. Precise Information achieved operating income of 91 million yuan in the first half of 2017, an increase of 68.58% over the previous year; net profit was 6.3411 million yuan, an increase of 153.68% over the previous year. The main reason for the increase in performance was the merger of Shikai Technology and the improvement in the coal safety industry, and the sharp rise in rail transit business. The company's consolidated gross margin was 53.43%, down 8.65 percentage points from the same period in 2016. The company has formed the three major business segments of military industry, communications, and coal mine safety. During the reporting period, due to the impact of national policies such as capacity removal and supply-side structural reforms, coal prices have rebounded to a certain extent, the overall profitability of coal enterprises has improved, and demand for safety products has rebounded. Affected by this, the company's traditional sales of coal safety products have increased by a certain margin. The asset restructuring was successfully completed, and the military industry became the focus of the company's strategic development. At the beginning of 2017, accurate information completed the fund-raising support for asset restructuring, and 22.049 million additional shares were issued, raising 180 million yuan in capital to pay cash consideration for the acquisition of Shikai Technology, pay intermediary fees, and supplement working capital. The issue price of shares is 8.18 yuan/share. The original shareholders of Shikai Technology promised to deduct non-net profit of 73 million yuan and 86 million yuan respectively in 2017 and 2018. Shikai Technology has a complete range of military personnel. It is mainly engaged in R&D, integration and production of optoelectronic technology in military weapons and equipment, as well as the development and production of integrated high-quality optical systems for national defense using high-precision optical component processing technology. Its main products include missile guidance systems, precision optical systems, etc. Furthermore, the Civil-Military Integration Industry Fund initiated by Precise Information has been filed. The fund will help discover accurate information and cultivate high-quality military projects and accelerate the strengthening of the military industry. During the reporting period, the fund has basically completed investment work in a military enterprise, which is mainly engaged in product development and production in the fields of wireless communication, satellite navigation, avionics, and monitoring and control. The subsidiary Fuhua Yuqi was transformed to target the two markets of rail transit and military network communications. During the reporting period, Fuhua Yuqi increased investment in R&D for communications services, and its high-speed rail Wi-Fi integrated server solution was first used in the high-speed rail standard train “Fuxing”. By the end of 2016, Fuhua Yuqi had a share of more than 70% in the domestic WIFI market for general speed trains. At the same time, Fuhua Yuqi and Shikai Technology used their respective advantages to join hands in the defense information technology industry. Fuhua Yuqi's military products business achieved a breakthrough during the reporting period, increasing revenue by about 5 million yuan. We are optimistic about the synergy that will be unleashed by the two companies' in-depth cooperation in the future. Profit forecasts and investment advice. We expect accurate information EPS from 2017 to 2019 to be 0.15 yuan/share, 0.18 yuan/share, and 0.23 yuan/share, respectively. Considering the company's transformation and development prospects and taking into account the valuation situation of comparable companies, we gave accurate information 60 times PE valuation in 2017. The corresponding target price was 9.00 yuan, and downgraded the company to the “increase in holdings” rating. Risk warning. Risk of impairment of goodwill; increased competition in the rail transit communication sector; fluctuations in military business orders; and the recovery of the coal industry fell short of expectations.