Report summary: The market share of the home appliance and consumer electronics business continues to rise, and Type C products have entered the release stage 1. The company is a leading supplier of domestic home appliances and consumer electronic connectors, and cooperates closely with major domestic home appliance manufacturers. Type C products have established advantages such as automated production lines and high-speed transmission technology accumulation, obtained certification from many consumer electronics customers, and entered the mass production and shipment stage, and will become a new growth point; the LED business is leading domestically, expanding from LED holders to optical products such as lenses, which will accelerate development; FPC products focus on mobile phones and mobile phone camera modules, benefiting from the development trend of high-definition cameras and dual cameras. 2. We believe that the company is a leading enterprise in the domestic home appliance connector field. The home appliance business has entered a period of steady growth, and the share of the home appliance and consumer electronics business will continue to increase. As production capacity for new products such as Type-C continues to be released and production yield continues to improve, Type C will become a new growth point. The automotive electronics business layout has achieved remarkable results and will become a new important growth point. The share of revenue will continue to rise 1. The NEV business has achieved a series of breakthroughs. In terms of “on-board chargers,” the company has become a core supplier of Porsche electric vehicles such as Mission E, BMW i3 series, Peugeot Citroen's next-generation platform, Dongfeng Fengshen A60 pure electric model, SAIC Motor's “EV car charger”, SAIC Motor's “EV model vehicle charger”, North and South China Volkswagen MQB platform hybrid PHEV and pure electric BEV model platform “vehicle charger” project. The China-Europe Smart Energy Industrial Park project continues to advance, and the first phase of construction is expected to be completed this year. 2. In terms of automotive wiring harnesses, the company's joint venture company Keshderun and holding subsidiary Plati's main business are high-end automotive connectors. Customers include FAW-Volkswagen, Mercedes-Benz, Continental, Bosch, etc., and acquired 60% of Liuzhou Shuangfei's shares to expand high-quality domestic customers such as SAIC-GM-Wuling, greatly increasing automobile wiring harness production capacity. 3. The value of bicycle wiring harnesses for traditional automobiles is about 2,000 to 4,000 yuan, and some high-end models are 5,000 to 6,000 yuan. According to estimates that China produced 28 million vehicles in 2016 and the price of automobile wiring harnesses worth 2,000 yuan, the annual demand for the Chinese automobile wiring harness market will exceed 56 billion yuan. 4. We believe that our subsidiary Meta's “vehicle charger” business is leading in the world and has sufficient orders. The centralized delivery time for most projects is from 2018 to 2019. The construction of product platforms and high-end customers will lay the foundation for the subsequent expansion of domestic and foreign NEV markets; the automobile wiring harness market is large, the value of new energy vehicle harnesses is higher, and automobile wiring harnesses have entered a performance harvest period. As production capacity for products such as chargers is released one after another, the automotive electronics business will become an important growth point for the company in the future, and its share of revenue will increase rapidly. The acquisition of 60% of Liuzhou Shuangfei's shares has been completed, and the company's investment value is highlighted 1. According to the fixed increase plan, the company plans to acquire 60% of Liuzhou Shuangfei's shares at a transaction price of 600 million yuan (480 million yuan in shares, 120 million yuan in cash), with an issue price of 28.86 yuan/share (after excluding interest); at the same time, it plans to raise no more than 38,033 million yuan in supporting capital, with a reserve price of 28.86 yuan/share (excluding interest). The company has completed a fixed increase in the acquisition of 60% of Liuzhou Shuangfei's shares, and will subsequently implement the issuance of shares to raise supporting capital. 2. Liuzhou Shuangfei's main business is supplying wiring harnesses for passenger cars and commercial vehicles. The main customers are SAIC-GM-Wuling, Dongfeng Liuqi, Beiqi Foton, Liugong Machinery, etc. According to performance promises, Liuzhou Shuangfei will achieve net profit of 120 million yuan/140 million yuan/160 million yuan respectively from 2017 to 2019. The corresponding PE acquisition will be 8.3 times, 7.1 times, and 6.3 times, respectively. The average annual compound growth rate of net profit for the next 3 years will be 16.9%. 3. We believe that this fixed increase will greatly enhance the company's competitive advantage and industrial position in the field of automotive wiring harnesses. Currently, the company's stock price is lower than the fixed increase issuance price, and the investment value and safety margin are remarkable, so we are optimistic about the company's development potential in automotive electronics. Investment proposals and profit forecasts 1. The company has formed a pattern of parallel development of the three major businesses of consumer electronics, automotive electronics, and Internet of Vehicles. As an industry leader in the field of home appliances and consumer electronics connectors, Type-C products have now entered the performance release period; in the automotive electronics field, the company has a rich product line and strong technical strength, and the demand for products such as automotive wiring harnesses and vehicle charging modules is strong, which will be a continuous growth point for the company in the future; in the field of Internet of Vehicles, the company's extended cooperation enhances technical strength, leading the industry's early layout, and products will gradually penetrate the automotive aftermarket. 2. Considering the impact of increased issuance and dilution (fixed increase in the acquisition of 60% of Liuzhou Shuangfei's shares and supporting financing), it is estimated that the EPS from 2017 to 2019 will be 0.55 yuan, 0.91 yuan, and 1.27 yuan. Given that the global automobile industry is currently accelerating its transformation in the direction of intelligence and electrification, China has initiated research on the discontinuation schedule of traditional energy vehicles, which will promote the accelerated popularization of intelligent connected vehicles. At the same time, considering that the company's automotive electronics business has entered the supply chain systems of many automakers, the performance flexibility is high, giving the company 55 to 60 times PE in 2017. A reasonable valuation for the next 12 months is 30.25 to 33.00 yuan, maintaining the company's “highly recommended” rating. Risk warning 1. The progress of the automotive electronics business fell short of expectations; 2. The progress of the Internet of Vehicles project fell short of expectations; 3. The release of production capacity fell short of expectations.