Incident: In August, Xinlong Electric purchased 100% of the shares of CLP Xingfa Technology Co., Ltd. by issuing shares and paying cash. The transaction price for 100% of CLP Xingfa's shares was 1,725 million yuan, and the final issue price was 754 yuan/share, adding 210 million shares. On October 12, CLP Xingfa received a notice that the Suqian Urban Road Surveillance Network and Intelligent Transportation Upgrading Project won the bid. The project amount was 73.508 million yuan, which contributed to the company's involvement in public safety, anti-terrorism, and smart city business. Main views: Policy promotion and urbanization demand stimulate public safety and anti-terrorism, smart city market With the continuous increase in China's urbanization rate, environmental pollution, traffic congestion, and hidden safety hazards are becoming more and more prominent. Faced with these problems, the “National New Urbanization Plan (2014-2020)” in March 2014 proposed “promoting smart city construction. By 2020, China will build a number of smart cities with distinctive characteristics”, using information technology such as radio frequency sensing technology, Internet of Things technology, cloud computing technology, and next-generation communication technology to build smart cities, achieve refined and intelligent management of cities, and ultimately achieve sustainable urban development. At present, smart city construction has expanded from more than 10 provinces and cities, including Beijing, Hebei, and Shanghai, to small and medium-sized towns, and has penetrated into every link in the industrial chain, breaking the existing industrial order in China. According to statistics, at present, the number of smart city pilots in China is close to 300, and investment related to smart cities is expected to reach 2 trillion yuan in the next 10 years. In smart cities, smart transportation plays an important role. Faced with the pressure of a sharp increase in population and a sharp rise in travel volume, the problem of urban traffic congestion cannot be alleviated by simply building additional roads, yet monitoring systems and information network systems can effectively achieve the safety and smooth flow of transportation. In the past five years, the market size of smart transportation has grown at an average rate of 30%, reaching 24.6 billion yuan in 2014. As smart city construction progresses, smart transportation is the first manifestation of market expansion as the vanguard of smart city construction. Along with the continuous and rapid development of the national economy, driven by government departments and large-scale projects and events such as “Safe City”, “Olympics”, and “World Expo”, China's security industry maintained a compound growth rate of 15.86%, reaching a market size of 430 billion yuan in 2014, forming a complete industrial chain system integrating scientific research and development, manufacturing, construction integration, alarm operation, and sales services. According to the “12th Five-Year Plan” of China's security industry, the entire security industry will achieve the overall goal of doubling its scale by the end of the “12th Five-Year Plan”. The total output value in 2015 reached a total annual output value of 500 billion yuan. Acquire high-quality enterprises, develop collaboratively and open up new markets, and CLP Xingfa is a leading domestic provider of solutions, products and operation services for public safety, anti-terrorism, smart cities, etc. The main business of CLP Xingfa is based on next-generation information technology such as the Internet of Things, big data, and cloud computing. It mainly provides end-to-end, integrated system solutions, products and operation services covering information sensing, transmission, storage, calculation, processing, application, etc. to the government, military, armed police, public security, communications, transportation, finance, petrochemical, electricity, coal, nuclear power plants and other industries. Currently, it has undertaken more than 1,500 information system integration projects, and is one of the enterprises undertaking the largest number of major system integration projects worth more than 100 million yuan per project in the industry. The company's business expanded rapidly. The total contract growth rate from 2012 to 2014 was 8% and 9%. It promised to achieve net profit of no less than 115 million yuan and 138 million yuan in 2015 and 2016, exceeding the profitability of the parent company and becoming a new profit growth point for the company after the merger. Xinlong Electric mainly provides a package of solutions for smart grid services such as the design, production and installation of complete high and low voltage equipment, components and automation products. Smart grids and smart cities all belong to intelligent management and are key industries belonging to the government, so the combination of Xinlong Electric and CLP Xingfa can achieve integration in customer development, maintenance, product and system design, installation or construction, service, etc., to provide customers with a full range of integrated system solutions to maximize customer needs, enhance customer experience and satisfaction, and enhance Customer stickiness. Subsidiaries have successively won bids for projects to reduce the downward pressure on the company's performance. Since 2013, the company's revenue has continued to grow negatively. In the first half of 2015, the company's revenue fell 32% year on year. The main reason for the decline in performance is the slowdown in investment, declining GDP growth, and insufficient demand in the electricity market. On the one hand, the company is stepping up efforts to adjust the market structure and customer structure, and on the other hand, the tightening of the macro environment has led to the extension of project construction periods, making it impossible to confirm revenue. On October 12, 2015, Xinlong Electric received a notification letter that its subsidiary CLP Xingfa won the bid for the Suqian Urban Road Surveillance Network and Intelligent Transportation Enhancement Project. The project amount was 73.508 million yuan; on September 25, China Power also won the bid for the “Police Equipment Procurement Project for a National Unit”, providing it with an explosion-proof robot, with a bid price of 6.08 million yuan. It will have a positive effect on promoting and promoting the company's products, business development and market expansion in the field of anti-terrorism and public safety, increasing the popularity of CLP Electric Xingfa in the field of anti-terrorism and public safety. From January to June 2015, CLP Xingfa won the bid for 90 projects, with a cumulative value of over $502 million. Up to now, CLP Xingfa is tracking more than 100 projects and implementing more than 300 projects. It is estimated that the project contract amount will exceed 10 billion yuan, which will guarantee the continued development of future business. The contract value for subsidiary system integration projects is predicted to increase by more than 12% in 2015 and 2016, improving the company's ability to cope with the continuous decline in the performance of transmission and distribution equipment. The future forecast company now uses a combination of “endogenous development” and “epitaxial expansion” to acquire the public safety, anti-terrorism, and smart city businesses of the China Power Development Authority as an opportunity to enhance its ability to cope with the slowdown in investment, declining GDP growth, and insufficient market demand. According to the company's performance in the first half of the year and the merger of CLP Xingfa, we expect net profit for 2015, 2016, and 2017 to be 6.5/11.1/1.15 billion yuan, EPS of 0.10/0.18/0.18 yuan, and the corresponding valuation of the current stock price is 18.0/32.4/32.4 yuan, giving it an “increase in holdings” rating.