Incident: 1. On March 26, the company released a draft employee shareholding plan. It plans to participate for no more than 1,700 company employees, including 13 directors and supervisors, and plans to raise no more than 400 million yuan. At the same time, the company's shareholding plan on behalf of employees will transfer 35.2856 million shares of the company (accounting for 6.42% of the company's total share capital) held by Chengshang Technology, the second largest shareholder, at a price of 6.804 yuan/share, for a total of 240 million yuan. 2. The company plans to carry out strategic cooperation with related parties, Wangxin Mechatronics in various areas such as the development and operation of industrial bases, joint operation and management of non-main business assets, and supply chains. At the same time, it is planned to jointly invest in the establishment of an intelligent control subsidiary with Wangxin Electromechanical to build a “smart transportation” business platform. Key points of the report: Following the integration of environmental protection business, the smart transportation sector has been clarified to help improve operational efficiency. The company's business is divided into two segments: smart transportation, energy saving, and environmental protection. In December 2019, the company unified the environmental protection business into an environmental protection platform and introduced Shanghai Shenneng Innovation as a battle investment. It plans to transfer 90% of the shares in the environmental protection business in three stages from 2019 to 2021. Now, the company plans to jointly invest in the establishment of an intelligent control subsidiary with Wangxin Mechatronics, and unify the company's smart transportation-related departments and businesses into the intelligent control subsidiary. The intelligent control subsidiary will be responsible for the entire “smart transportation” sector. Among them, the company accounts for no less than 80% of the shares of intelligent control subsidiaries. Furthermore, the company plans to carry out strategic cooperation with Wangxin Electromechanical in various areas such as the development and operation of industrial bases, joint operation and management of non-main business assets, and supply chains. This integration will help the company to clarify existing resources in the transportation business, improve operating efficiency, optimize the management structure, and enhance the subjective activism of various business sectors. Employee shareholding involves a wide range of topics, injecting strength into the company's long-term healthy development. The company's current employee shareholding plan has a proposed fund-raising limit of 400 million yuan, and no more than 1,700 employees will participate. Among them, the company's 13 directors and supervisors plan to subscribe for a maximum share of 200 million shares, accounting for about 50%. Furthermore, the establishment of an intelligent control subsidiary will reserve no more than 10% of options for the company's core team in the smart transportation sector, and will open subscriptions to the core team in the smart transportation sector at an appropriate time. The company deeply binds employee interests through employee stock ownership and options plans, which helps stimulate team motivation, inject strength into the company's long-term healthy development, and also shows the company's confidence in future development. The rail traffic signal system has sufficient orders in hand, strong order continuity, and high performance flexibility. Currently, the company's rail traffic signal system has orders of about 4 billion yuan. In 2019, it won an additional bid of 2.180 billion yuan, +256% over the same period last year, and self-developed systems accounted for 63.85%. The gross margin of the company's self-developed signal systems is far higher than that of joint venture projects. The increase in the proportion of self-developed signal systems will drive the gross margin of the company's rail traffic signal systems to gradually rise. Urban rail construction is in full swing in the next few years, and the company's rail traffic signal system orders will continue to be strong. According to the order cycle estimate, the company's signal system entered a period of high revenue confirmation growth in 2019-2021. We estimate that the revenue break-even point of the rail traffic signal system is about 1 billion yuan. When revenue exceeds the break-even point, the performance is more elastic. Profit forecasts and investment recommendations anticipate that the company will achieve revenue of 2,488/28.71/3,271 billion yuan respectively in 19-21, and realized net profit of 1.5/21/3.1 billion yuan respectively, corresponding to current PE of 27/20/14. Considering that the company has sufficient orders in hand and rail transit has entered an accelerated confirmation stage, the company was given a “buy” rating. Risks suggest that the bidding process for urban rail transit projects falls short of expectations; the risk of impairment of assets such as accounts receivable; and environmental protection business integration falls short of expectations.