The terminal air defense sector mainly involves private enterprises. The company is a supplier of terminal air defense command and control systems in China. Since its establishment, the company has actively implemented the “civil-military integration” strategy. At present, the business has formed four major technical product fields: “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 integrated marine electronic detection systems.” Among them, the company's leading product, a low-altitude short-range air defense combat command system with continuous wave radar as the core, has achieved significant results in the field of low-altitude air defense military at home and abroad, and participated in security work for many major activities. There is a temporary decline in performance due to insufficient orders, and there is plenty of room for the anti-aircraft missile command system. Since the military sector is the company's main source of performance. Affected by the military market's long development cycle, few orders, and concentrated deliveries, etc., the company's core product, the portable anti-aircraft missile command system (which accounted for 74% of the main business revenue in 2013) plummeted, 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%). We believe that the decline in the company's performance is only temporary. The international arms industry has predicted that by 2017, the total value of global anti-aircraft missiles will exceed 20 billion US dollars, but the current value is only about 10 billion US dollars, so there is still huge room for demand. Endogeny+extension, expansion into the civilian field. In order to eliminate the risk of a single downstream military customer, the company is actively expanding the civilian sector. On the endogenous side, by undertaking the “General Aviation Integrated 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 exploration, tracking, and communication technology was carried out through the establishment of an offshore engineering research and development center with the School of Navigation of the Western University of Technology. At present, the company's shadowless ocean exploration series products have been used for underwater environment and resource exploration; in terms of extension, 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 that the net profit in 2015 and 2016 would not fall below 25 million yuan and 35 million yuan respectively, contributing significantly to the company's performance. Set up a metamaterial 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 metamaterial 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 field of military industry segmentation. Up to now, most of them are at the stage of theoretical discussions and laboratory sample development, and there are still many technical problems that have yet to be overcome before truly large-scale industrial application. The physical properties of the electromagnetic metamaterials studied by the company make metamaterials have broad application prospects in the fields of high-performance devices and stealth technology. For the first time, an “increase in holdings” price rating was given, with a target price of 205.20 yuan. Considering the decline in the company's performance in 2014 due to an unexpected sharp drop in core product revenue, the company's active deployment in the civilian sector has some expectations of extension. We expect the company's EPS for 2015-17 to be 1.52, 1.79, and 2.52 yuan, respectively. Comparing “military and civilian integration”, the average PE of a comparable company in 2015 was 148.49 times, and we think the company's reasonable valuation in 2015 was 135 times. Corresponding to the target price of 205.20 yuan, the “increase in holdings” rating was given for the first time. Risk warning: R&D progress is lower than expected, and military orders are uncertain.