1. Overview of the incident. Recently, Zhengye Technology issued an announcement: to acquire 80% of Jiukun Information's shares with 96 million yuan in cash. 2. Analysis and judgment The acquisition of Jiukun Information will create an overall intelligent manufacturing system and improve the level of intelligence in automated production lines 1. Jiukun Information is mainly engaged in intelligent manufacturing/Industry 4.0 overall solutions, system integration and software development, and can provide overall solutions for intelligent manufacturing based on IoT technology. The self-developed intelligent manufacturing Q9 CPS platform fundamentally solves the “island” problem of existing information systems of enterprises, and fully realizes the real-time and accuracy of logistics, warehousing, production, equipment and other data. Its products have been successfully used in companies such as Hongtu Technology (002101), Yilisheng Technology, Haopeng International (HPJ), Lu Chang Technology (002813), Bama Tea Co., Ltd. (834754), Shangda Electronics (836298), Herby Electronics, and DHL (DHL). 2. We believe that the acquisition of Jiukun Information will be able to use its leading CPS platform to effectively solve the company's internal informatization silos, achieve information interconnection and closed-loop management of the industrial chain from raw materials, production, warehouses, sales, after-sales, etc., establish an overall intelligent manufacturing system, and improve the company's production efficiency. The reasonable acquisition of PE will enhance the company's profitability and create new growth points 1. According to the announcement, Jiukun Information promised that net profit after deduction from 2017 to 2020 will not be less than 6 million yuan, 9 million yuan, 12 million yuan, and 15 million yuan, respectively. The corresponding PE acquisition will be 20 times, 13 times, 10 times, and 8 times, respectively. The company's acquisition of 51% of Peng Yuwei's shares and 100% of Xuanshuo Optoelectronics's share acquisition of PE corresponding to the 2017 performance promise was 7.4 times and 9.6 times, respectively. Considering that Jiukun Information has the potential for rapid growth in intelligent manufacturing system integration, this PE acquisition is reasonable. 2. We believe that the acquisition of Jiukun Information will further improve the company's business layout in the field of Industry 4.0 intelligent manufacturing, promote the company to build a 3C automation and intelligent platform, and enhance the company's profitability. The two sides have complementary advantages in the fields of intelligent manufacturing and Industry 4.0, which helps to exert synergies 1. The company is mainly engaged in the R&D, production and sales of hardware equipment in intelligent manufacturing industries such as PCB precision processing and testing equipment, lithium battery X-ray inspection equipment, laser cutting machines, laser drilling machines, and laser marking machines. Jiukun Information focuses on research and development of software and systems such as “Industry 4.0” and intelligent manufacturing system integration. 2. We believe that the two sides have complementary advantages in technology, customers and downstream applications in the field of intelligent manufacturing. This transaction will be able to deeply integrate the resource advantages of all parties in terms of hardware and software, enhance professional service capabilities in the field of intelligent manufacturing, and make better use of synergies. 3. Profit Forecast and Investment Suggestion The company's business involves PCB precision processing and testing equipment, LCD module automated assembly and testing equipment, PCB precision processing auxiliary materials, LED automated assembly and testing equipment. Benefiting from the rapid development of domestic PCB, lithium-ion battery, LED and OLED fields, the company's performance is expected to be further improved. It is estimated that the company's EPS from 2017 to 2019 will be 1.20 yuan, 2.49 yuan, and 3.61 yuan respectively. Based on the elasticity of the company's performance growth, the company will be given 45 to 50 times PE in 2017, with a reasonable valuation of 54.00 to 60.00 yuan for the next 12 months, maintaining the company's “highly recommended” rating. 4. Risk warning: 1. New product development is slow; 2. Acquisition integration falls short of expectations; 3. LED and OLED development falls short of expectations.