Summary of the report: Bus connectivity is accelerating, and the prototype of a city union has begun. By the end of the 12th Five-Year Plan, 100 cities will be connected. In October 2013, Dongxin Heping and Beijing Yimesecode Data jointly invested 60 million yuan to establish Citylink Data. In 2013/12, City Federation Data was awarded by the Ministry of Housing and Construction to undertake the construction and operation of the only first-level TSM service platform for multiple applications of the National Urban Card. On August 1, 2014, Citylink Data signed an agreement with China Telecom to officially launch interconnected city bus card business cooperation based on NFC technology. City Union is promoting the expansion of transportation card application scenarios, and the potential value of “Little UnionPay” is huge. Create a “small UnionPay” among city cards through connectivity. In the field of city cards, the Ministry of Housing and Construction is the standard setter and supervisory authority. We believe that the City Union Company, a joint venture between the company and the Ministry of Housing and Construction, will hopefully replicate the business model of UnionPay, which is a subsidiary of the central bank, and become a “small UnionPay” between the city cards. The City Federation is rapidly promoting the expansion of transportation card application scenarios into the field of daily consumption. In the consumer sector, at present, most urban one-card applications have broken through integrated transportation and expanded to public utility payments, refueling, access control for large public buildings and scenic gardens, digital community management, parking lot management, and daily convenience microconsumption. The company will enjoy the NFC payment bonus. The central bank clearly supports the NFC-SWP solution that stores security modules in SIM cards. The NFC industry chain has ushered in a critical development point, and companies will benefit from NFC-SIM cards. In 2014, China Mobile clarified the direction of vigorously developing NFC-based mobile payments, plans to distribute at least 100 million 4GNFC-USIM cards, and invest special funds to incentivize NFC mobile phone sales. The company was selected as a supplier for China's mobile wallet USIM card and China Telecom's NFC-SWP card, which has positive significance for the company's future expansion in the field of mobile payment business. The smart card business is booming and management improvements are improving, and the performance of two-wheel drive is growing. The reason for the boom in the company's industry and the explosion in two-wheel drive performance due to operational improvements. From an industry perspective, 1) the domestic financial IC card market continues to grow at a high rate, and the total number of financial IC cards issued is expected to increase by 30% compared to the same period last year, reaching 600 million; 2) the social security card market is rising steadily; 3) SIM cards are in the 3G and 4G switching stage, and short-term demand has declined slightly, but NFC-SIM cards and 4G cards are about to explode; 4) demand for overseas communication card products has rebounded slightly, and the upward pressure on the exchange rate has abated. From the perspective of the company's operations, through measures such as restrictive stock incentives, the enthusiasm of the company's management team has increased. On the one hand, it will make more active use of state-owned enterprise resources to develop business, and on the other hand, it will pay more attention to improving the company's performance. The company's chairman increased his holdings by 340,000 shares during the reporting period, bringing the total shareholding to 970,000 shares. Profit forecasts and investment advice. We expect the company's EPS for 2014-2015 to be 0.3 and 0.45 yuan, and the corresponding PE is 55 and 37. Maintain a “Highly Recommended” rating. Risk Alerts. 1) Competition in the smart card market is intensifying; 2) Urban Union is progressing too slowly; 3) systemic risks.