Incident: The company recently received a notice from China Telecom Investment Holdings Co., Ltd., a unanimous activist from the controlling shareholder East China Computing Technology Research Institute (the 32nd Research Institute of China Electronics Technology Group Corporation) that Telecom Investment intends to transfer its 21,323,976 shares of Huadong Computer (accounting for 4.9956% of the company's total share capital) to China Ordnance Equipment Group Co., Ltd. free of charge. After the transfer, the number and ratio of shares held by 32, the controlling shareholder of the company did not change. Their concerted action was to invest in Huadong Computer and hold 12.9567% of the total share capital of Huadong Computer, while the Ordnance Equipment Group held 4.99% of the company's total share capital. Introduce major strategic shareholders to open up space for future collaborative development. The company's strategic shareholder, China Ordnance Equipment Group Co., Ltd., is an important state-owned enterprise directly managed by the central government. It is a core force in the national defense science and technology industry. It is a strategic enterprise for national defense construction and national economic construction. It is one of the most dynamic military and civilian integrated large-scale military industrial groups in China. It has been ranked among the top 500 in the world for many years, ranking 101 at the highest ranking. The group company now has more than 60 enterprises and R&D institutions, and has cultivated a number of well-known brands with broad social influence, such as “Changan” and “Construction”. At present, it has formed equipment systems such as terminal defense, light weapons, mobile assault, advanced ammunition, information and optoelectronics, anti-terrorism and emergency response. The equipment serves a wide range of armed forces in China's land, sea, air, rocket forces, public security, armed police, etc., and plays an important fundamental and strategic role in China's national defense and security. The introduction of major strategic shareholders is of great significance to the future collaborative development of the company's business in related fields. The new shareholder, Ordnance Equipment Group, is beneficial to the company's Huacheng Jinrui Shenwei server market development. At the beginning of 2019, Songjiang District and China Telecom undertook the national strategy of benchmarking services, jointly promoted the construction of the Yangtze River Delta G60 Science and Technology Innovation Corridor, signed a memorandum of strategic cooperation and a strategic cooperation framework agreement, focusing on building a nationwide server industrialization project. By integrating innovative R&D and industrial resource capabilities, and exporting the large-scale capabilities of autonomous and controllable servers to information systems, the Electronic Technology SoftInformation 32 Institute has made every effort to build Huacheng Jinrui Company. Its Shenwei server can build a new highland of next-generation information infrastructure and establish a good innovative application and ecological environment. The company's introduction of strategic shareholders this time is the core force of the national defense technology industry. It has huge resource advantages in the military industry, which is conducive to Sunway's server market development. Build two major new businesses, Innovation and IDC, and promote the company's upgrading and transformation. The company seizes major opportunities in the industry's information technology innovation market and focuses on building complete IT innovation solutions for industries such as finance. At the same time, the company deepened its industrial layout and invested in the construction of a “cloud base” data center in Songjiang, Shanghai in 2020. The first phase of the data center plans 3,024 racks, mainly serving financial clouds, government clouds, and industry customer applications. The “cloud base” data center project has been included in the list of the first batch of new Internet data center projects supporting energy use in 2019. Industry-oriented information technology innovation solutions and data operation services will become the twin engines for the upgrading and development of the company's business. Investment suggestions: As a platform for scarce listed companies located in Shanghai under China Telecom, the company is expected to fully benefit from the Group's deepening reform process. In addition, it introduces major strategic shareholders to open up space for future collaborative development. The company's positioning is improving while facing huge opportunities. It is estimated that the EPS for 2020-2021 will be 0.84 yuan and 0.92 yuan respectively, maintaining a buy-A rating, and a target price of 30 yuan for 6 months. Risk warning: New business development falls short of expectations.