I. Overview of events

The audit committee on mergers and acquisitions of listed companies of the China Securities Regulatory Commission held its 31st working meeting in 2017 on June 15, 2017. The company issued shares and paid cash to purchase assets and raise supporting funds and related transactions without conditions.

II. Analysis and judgment

Dingzeng has been approved to help the company to transform the high-end equipment manufacturer of civil-military integration, and significant progress has been made in the acquisition of red technology, Zhongqiang technology and related fund-raising projects. After the acquisition of Hongxiang Technology and Zhongqiang Technology, the company will change the status quo of relatively single product categories and expand into the R & D of high-end equipment for infrared imaging, ultraviolet imaging and gas imaging, as well as the production and development of military camouflage products. In the future, the company is expected to deeply integrate with Zhongqiang technology and red technology in the military field, and grow into a military-civil integration high-end equipment manufacturer with diversified products of military fan, infrared / ultraviolet detection and camouflage technology. Fund-raising projects such as "industrialization of pedestrian early warning vehicle infrared night vision system", "industrialization of precision infrared optical components and complex infrared thermal imaging lenses" and "construction of multi-spectrum testing center" will also promote the company in the field of infrared and ultraviolet imaging and stealth camouflage equipment scale expansion and layout, for the company's future performance to provide new growth power.

The performance of mergers and acquisitions has continued to grow at a high level, and the profitability of listed companies has significantly improved. The promised net profit of Hongxiang Technology from 2016 to 2019 is not less than 50 million yuan, 75 million yuan, 93.75 million yuan, and 117.2 million yuan respectively, the cumulative committed net profit is not less than 335.95 million yuan, and the CAGR reaches 32.84%. From 2016 to 2020, Zhongqiang Science and Technology has pledged net profits of not less than 35 million yuan, 70 million yuan, 94.5 million yuan, 127.575 million yuan and 172.2263 million yuan respectively, with a cumulative net profit of not less than 499.3013 million yuan and a CAGR of 48.94%.

After the completion of this transaction, the profitability of the company will be significantly improved and the performance of listed companies will be greatly enhanced.

The ventilation equipment business of subway and tunnel has been improving for a long time.

The leading position of ventilation equipment in subway and tunnel is stable. During the 13th five-year Plan period, China is expected to build 2500 km of subways, with CAGR reaching 11.38%. By 2020, China plans to build 5000 tunnels with a length of more than 9000 km. With the growth of infrastructure investment such as subways and tunnels, the company's main business will continue to improve. At the same time, civil and industrial, nuclear power products will bring new increments to the company's main business. The company stepped up efforts to urge the repayment of accounts receivable in 2016, and the cash flow of business activities, investment activities and fund-raising activities all improved significantly.

Third, profit forecast and investment suggestions:

Regardless of the impact of this merger, the company's EPS from 2017 to 2019 is expected to be 0.30,0.41,0.50 respectively.

Considering the impact of this restructuring, the exam preparation performance of the company from 2017 to 2019 is 201 million yuan, 266 million yuan and 339 million yuan respectively, assuming that the share capital after this additional offering and matching fund-raising is 260 million shares, the corresponding EPS is 0.77 yuan, 1.02 yuan and 1.30 yuan respectively, and the corresponding PE is 50 times, 38 times and 30 times respectively, maintaining a "highly recommended" rating.

IV. Risk hints

The progress of subway and tunnel construction slowed down, the reorganization of major assets was blocked, and the performance of mergers and acquisitions fell short of expectations.