Matters: The company signed a strategic cooperation agreement with iFLYTEK at HKUST on January 31, 2013. The two sides plan to carry out strategic cooperation in the field of electronic and electric toys and cooperate in the design, development, production and marketing of new products. This strategic cooperation agreement is a framework cooperation agreement, and there is uncertainty about the specific implementation content and progress. Peace of Mind: Joining hands with leaders in the Chinese voice industry, it is expected that product upgrades will be achieved. iFLYTEK is a leader in the Chinese voice industry. Through cooperation with iFLYTEK, the company plans to integrate and apply iFLYTEK's core voice intelligence technology to enhance brand influence and develop products and markets in related fields. This agreement is a framework agreement. The main contents include: 1. Product program cooperation. The two sides jointly designed a new product. iFLYTEK is responsible for ongoing research and upgrading of embedded products that are more suitable for toy applications, product technology program development, script preparation, and content production. Qunxing Toys is responsible for material procurement, product manufacturing, cost quality control, brand promotion, and finished product sales. 2. Information sharing. The two sides shared information on the future direction of technology development, customer and market demand, industry trends, component costs and prices, and product sales in the field of cooperation. 3. Mutual business benefits. The two sides gave each other the most preferential treatment in the industry in terms of technical program licensing, component prices, and finished product prices. 4. Future technical cooperation. The two sides will also continue to experiment with cooperation in areas such as speech recognition, text and graphic recognition, voice processing and transformation, motion voice control, mobile internet toys, and human-computer interaction system robots. The balance sheet has been optimized, and the profit sheet is expected to improve accordingly. According to the January 22 performance report, the company's revenue increased 2% year over year, and net profit decreased 22% year over year. It is estimated that one of the main factors in negative performance growth in 2012 is the decline in gross margin caused by the company's active removal of inventory. Judging from the company's balance sheet, the inventory turnover ratio and accounts receivable turnover ratio all showed signs of improvement. As the company goes, inventory pressure gradually eases, and it is expected that the profit statement will improve accordingly. The profit forecast and valuation estimate that the company's EPS from 2012 to 2014 is 0.30, 0.37, and 0.45 yuan respectively, corresponding to the closing price of 13.53 yuan on February 1, 2013, and PE is 44.5, 36.7, and 30.1 times, respectively. Considering that the company is expected to benefit from the relaxation of the two-child policy and that there is a possibility of a reversal in its 13-year performance, it was covered for the first time, and a “recommended” rating was given. Risk warning: The development process of new products, marketing plans, etc. are not yet clear, so there is uncertainty about the contribution to the company's performance; domestic market development falls short of expectations, foreign markets are weak, etc.