1. Overview of the incident The company's 2014 three-quarter report: operating revenue of 100 million yuan, up 20.22% year on year, and net profit attributable to shareholders of listed companies was 14.394 million yuan, up 12.09% year on year. Of these, the government subsidy is about 5.712 million yuan, and EPS = 0.156 yuan. 2. Analysis and judgment of products showed a diversified trend, and orders for new products increased (1) The company's core technologies, continuous wave radar technology and photoelectric detection technology, are both military and civilian dual-use technologies. In the first three quarters of 2014, the company actively promoted its application in the civilian field. The company mainly completed and delivered product contracts with a contract amount of 28.2 million yuan for air defense combat command systems, information fusion systems, combat 3D posture systems, command and training information systems, shooting efficiency evaluation systems, etc., and a comprehensive radar test system contract with a contract amount of 10.73 million US dollars; (2) The company made a breakthrough in the field of perimeter security in key locations. Low-altitude infrared reconnaissance devices, photoelectric surveillance systems and ground target surveillance radar products have signed orders totaling 114 million yuan; (3) In addition, The company is also actively expanding the field of ocean exploration science and technology, using the three major projects in the field of marine technology of the 863 Plan - engineering technology for 50 kg portable autonomous observation systems, development of a 300 kg small intelligent detection system, and development of an AUV-based low power consumption and integrated synthetic aperture sonar system as an opportunity to make a forward-looking layout for future development. Eight major R&D projects to promote the diversification of the company's products in the future, the company will focus on promoting eight major R&D projects: (1) the “General Aviation Comprehensive Operation Support System” project in the “China Civil Aviation Collaborative Air Traffic Control Technology Comprehensive Application Demonstration” project; (2) next-generation portable air defense missile command system; (3) next-generation regional air defense group communication command system; (4) target indicator radar series products; (5) photoelectric detection series products; (6) ground reconnaissance and command systems; (7) major projects in the field of marine technology in the 863 Plan;) Ocean Detective communication series products. Overall, the company will further improve the development level of continuous wave radar series products, focusing on strengthening products such as continuous wave 3D radar, high reliability and low radiation continuous wave DBF low-altitude surveillance radar, DBF high-precision three-coordinate low-altitude reconnaissance radar, infrared remote warning and detection systems, next-generation portable air defense missile command systems, next-generation field communication and command systems, and land border control information systems. At the same time, the company will focus on speeding up the civilian transformation of existing military technology and promoting the application of products in civil applications such as general aviation, civil aviation, key locations, and marine applications. 3. Profit forecast and investment recommendations The net profit for 2014-2016 is estimated to be 136 million yuan, 156 million yuan, and 189 million yuan respectively; the equivalent EPS is 1.13 yuan, 1.30 yuan, and 1.58 yuan, respectively, corresponding to the current stock price of PE 91, 79, and 65 times. Taking into account the opportunities brought about by the company's future diversification of products and the company's current stock price, we gave a “careful recommendation” rating and a reasonable valuation of 95 to 125 yuan. 4. Risk Warning: Risk of falling orders from domestic customers.