Core opinion The company's introduction of a bailout fund is expected to divest Longxin Technology and drive operations back on track. The company's main rail transit business is full of orders. At the end of 2018, on-hand orders also increased by 28.6%, and businesses such as new energy vehicles progressed smoothly to ensure performance growth. The company's net profit forecast for 2019/20/21 was updated to 33/3.8/4.3 billion yuan. The current price corresponds to 16 times PE in 2019, maintaining the “buy” rating. With the introduction of a bailout fund, Long Xin entered the divestment process. The company announced that it intends to sell 100% of Longxin Technology's shares to Nanjing Zijin Guancui Private Enterprise Relief and Development Fund Partnership (Limited Partnership), at a transaction value of 400 million yuan. After the equity transfer is completed, if the transferee (bailout fund) subsequently disposes of Longxin Technology's income less than 400 million yuan, then all of the disposal revenue is owned by it. If the disposal revenue is above 400 million yuan, 90% of the portion exceeding 400 million yuan is owned by the listed company, and 10% is owned by the bailout development fund. At the same time, the company's 12 management shareholders agreed to hold 43.535,500 shares to provide pledge guarantees for the bailout fund. If the revenue from subsequent disposal is less than 400 million yuan, compensation for the difference in the bailout development fund will be limited to the above pledged shares. The plan is yet to be voted on by the shareholders' meeting. Risk exposure is sufficient, and the company's operations are expected to get back on track. The company's net profit in 2018 was $3.15 billion, which included $1,067 million in anticipated debt and bad debt preparations for Longxin Technology, and estimated impairment of goodwill of $2,271 billion. Excluding the influence of Longxin Technology, the company achieved net profit of 283 million yuan in 2018, an increase of 15.98% over the previous year. In 19Q1, the company's revenue and net profit growth rates were +4.1% and -38.4% respectively. Excluding the influence of Long Xin, we estimate that the profit growth rate of the main business may be around 50%. The details of the divestment plan of Long Xin have yet to be announced, but the risk holders have been released. If the transaction can be completed as scheduled, Longxin Technology will no longer join forces, and the company is expected to get through the difficult period caused by this acquisition. The main rail transit business is full of orders, and the development of the main business has remained steady. The company's market share of 50% + of the city rail gate system has been maintained for more than 10 years, and the overall market share of external trains has also exceeded 50%. The gross margin has remained stable through independent research and development, substitution and fine control, and the competitiveness of the main business is outstanding. Domestic railways and subways are expected to reach a peak in traffic in 2019-2020. As of the end of 2018, the company had orders of 3.71 billion yuan, an increase of 28.6% over the previous year, ensuring a high degree of certainty in the growth of the company's main business. The company's new energy vehicle parts and traditional automobile castings and forgings are also progressing smoothly. Risk factors: Long Xin's divestment progress falls short of expectations; domestic railway or subway construction progress falls short of expectations; gross margin of the company's products falls short of expectations; growth in new energy vehicle parts or traditional automobile castings and forgings falls short of expectations, etc. Investment advice: If the influence of Long Xin is not taken into account, the company's main business has developed steadily over the past two years. The company has introduced a bailout fund. If the company introduces a bailout fund this time, the overall operation is expected to return to the right track after successfully divesting Long Xin. Considering the impact of Long Xin's business changes, we lowered the company's net profit forecast for 2019/20 to 33/ 380 million yuan (original forecast 77/92 million yuan), added the 2021 net profit forecast by 4300 million yuan, corresponding to the 2019/20/21 EPS of 0.33/0.38/0.43 yuan. The current price corresponds to 16 times PE in 2019, maintaining the company's “buy” rating.