Key investment points: Private enterprises mainly participate in the terminal air defense sector. The company is a domestic supplier of terminal air defense command and control systems. Since its establishment, it has actively implemented the “civil-military integration” strategy. At present, the business has formed four major technical product areas: “regional low-altitude short-range and ground reconnaissance and combat command systems, high-end safety and defense systems, general aviation airspace surveillance and management service systems, and marine electronics integrated detection systems.” Among them, the company's leading product, the low-altitude short-range air defense combat command system with continuous wave radar as the core, has achieved significant achievements in the low-altitude air defense military field at home and abroad, and has participated in support work for many major activities. Performance declined temporarily due to insufficient orders, and there was plenty of room for anti-aircraft missile command systems. Since the military goods sector is the company's main source of performance. The company's core product, the portable air defense missile command system (which accounted for 74% of the main business revenue in 2013), plummeted due to the long development cycle of the military products market, the small number of orders, and concentrated deliveries, etc., causing the company's performance to temporarily decline. In 2014, it achieved revenue of 223 million yuan (YOY -26.50%) and net profit of 75.284 million yuan (YOY -48.59%) to mother. We believe that the decline in the company's performance is only temporary. The international arms community has predicted that by 2017, the total value of global anti-aircraft missiles will exceed 20 billion US dollars, while the current value is only about 10 billion US dollars, so there is still huge room for demand. Endogenous+outreach, expanding into the civilian field. In order to eliminate the risk of a single downstream customer of the company's military products, the company is actively expanding the civilian sector. On the endogenous side, by undertaking the “General Aviation Comprehensive Operation Support System” project, military radar detection and photoelectric detection technology can be applied to general aviation airports and public transport airport terminal areas to serve airport airspace management. Research on underwater detection, tracking, and communication technology was carried out through the establishment of a marine engineering research and development center with the Western Institute of Technology's School of Navigation. Currently, the company's shadowless ocean exploration series products have been used for underwater environment and resource exploration; on the epitaxial side, the company acquired 60% of Huayang Communications's shares in May 2015 to open up the civil communications market. In 2014, Huayang Communications achieved net profit of 10.4064 million yuan, and promised net profit of not less than 25 million yuan and 35 million yuan respectively, contributing to the company's performance. Set up a metamaterials research and development center to enhance the core competitiveness of military products. The company issued an announcement on June 24, 2015 to proactively establish a metamaterials research and development center. As a new type of material, metamaterials have extraordinary physical properties not found in natural materials, and are one of the most advanced technologies in the military industry segment. Up to now, most of them are at the stage of theoretical discussion and laboratory sample development, and there are still many technical problems to be overcome before actual large-scale industrial application. The physical properties of electromagnetic metamaterials studied by the company make metamaterials have broad application prospects in fields such as high-performance devices and stealth technology. For the first time, an “gain” rating was given, and the target price was 205.20 yuan. Considering the decline in the company's performance in 2014 due to an unexpected sharp drop in revenue from core products, the company actively lays out certain expectations for the civilian sector. We expect the company's EPS for 2015-17 to be 1.52, 1.79, and 2.52 yuan, respectively. Compared to the average PE of a comparable “military and civilian integration” company in 2015, we think the company's reasonable valuation in 2015 was 135 times. The corresponding target price is 205.20 yuan, which is the first time that an “increase in weight” rating has been given. Risk warning: R&D progress falls short of expectations, military orders are uncertain.