Incident The company held an on-site investor conference on industry transformation at the headquarters on November 29, 2016, to clarify the company's “double transformation” strategic plan for industry transformation and product transformation. The review company has implemented a dual transformation strategy. One is product transformation, and the other is industry transformation. Product transformation expands coal mine safety monitoring products to environmental protection and other fields, and coal mine information communication products to rail transit and military industries. The direction of transformation of the industry is the military industry. Taking advantage of the major trend of civil-military integration, the first step in military transformation was taken through the acquisition of Shikai Technology. In the future, it will combine Eloka's machining capabilities, Fuhua Yuqi's data communication advantages, and M&A fund project reserves to achieve rapid military business growth. EUROCA parent company: Coordinates subsidiaries to use their respective strengths. The original main business of EUROCA was coal mine safety monitoring products. In the future, it will be positioned as a holding platform, forming a parallel pattern of EUROCA Holdings and subsidiaries. The advantages of EUROCA are capital, space, and processing capacity. Fuhua Yuqi has product development and technology accumulation in the communications field, and Shikai Technology has a military platform and full qualifications. In the tripartite cooperation, EUROCA acts as a facilitator, giving full play to the strengths of each subsidiary. Since this year, coal prices have recovered, and the profits of coal companies have improved, which is beneficial to the company's demand for traditional products, which will take some time to transfer. Fuhua Yuqi: The rail transit sector is based on products and operations, and the original coal mining sector has secured major customers. Fuhua currently has 4 product lines, namely rail transit communication systems, mining IoT systems, industrial safety big data systems, and 4G LTE digital systems. The company's basic position in railway communication is “product-based and involved in operation”. In the early stages, it has developed various rail transit communication products one after another, and plans to cooperate with railway companies to participate in the operation of communication systems in the later stages. Sales of general in-vehicle communication products, such as WIFI set-top boxes, etc., continue to be stable, and new equipment is gradually being added; high-speed rail wireless communication is undergoing product testing, and there is plenty of room for development in the later stages. In the field of traditional coal mine communication products, the company focuses on serving coal mining enterprises with good economic benefits such as Shenhua Group. After the acquisition of Shikai Technology in 2015, according to the board arrangement, it will focus on developing corresponding solutions and products in the 4G LTE field in response to defense informatization needs. Shikai Technology: The main force in the military industry. Existing products guarantee performance, and products under development provide room for growth. Shi Kai is mainly engaged in R&D and production of optoelectronic technology in military weapons and equipment. The products are missile guidance systems for accurate strikes on tanks, ships, etc., as well as supporting products such as maintenance equipment and operation training equipment. The company's military is well-qualified and is a designated production unit for anti-tank missile guidance systems in China. In addition to the company's own technical team, R&D capacity relies on the Changchun Institute of Optoelectronics of the Chinese Academy of Sciences, and R&D consulting teams are distributed at various research institutes across the country. Shi Kai promised to deduct 6,000/7300/86 million yuan in non-net profit for 16-18 years. Existing products have a high performance guarantee, and products under development provide room for growth. Xi'an Fund: Helping the military industry achieve high growth. Xi'an's merger and acquisition fund was established this year, with a total scale of 200 million yuan and a term of seven years. It is mainly engaged in equity investment. The direction is mainly military and civilian integration, complemented by other high-tech technologies. The composition of the fund consists of China Lucin Venture Capital investing 80 million, accounting for 40%, Eloka investing 78 million, accounting for 39%, and the Xi'an Venture Capital Guidance Fund of 40 million, accounting for 20%. The projects saved before and after the establishment of the fund are highly consistent with the direction of Euroka's military transformation. The high growth of the military business in the future will come in part from the fund's investment projects. Profit forecast We forecast the company's revenue for 2016-2018 of 2.43/4.05/496 million yuan, up 47%/67%/23% year on year; net profit to mother of 39/89/105 million yuan, up 66%/129%/18% year on year; EPS was 0.06/0.14/0.17 yuan respectively; and corresponding PE was 154/67/57 times, respectively. Investment suggestions We believe that the company's product and industry transformation strategy has taken shape, that Shikai Technology has become the main force in the military business, that existing and under development products can guarantee performance growth, and that the civil-military integration merger and acquisition fund provides a direction for continuous expansion; Fuhua Yuqi's product transformation and rail transit sector, revenue and profit increased rapidly in the first three quarters of this year; the parent company uses capital, space, and processing advantages to coordinate various subsidiaries to maximize benefits, and the improvement in profits of downstream coal companies is beneficial to the recovery of product demand. We maintain the company's “buy” rating, with a target price of 14-16 yuan for 6-12 months. Risks indicate the risk of mergers and acquisitions, the risk of military industry investment falling short of expectations, and the risk of industrial fund investment projects.