Zhenshitong plans to acquire NetRunjieke. Its cloud data center construction, operation and maintenance business services and channel capabilities are both, and it is on the cusp of private cloud construction and data center cloudification, and is expected to achieve rapid growth in 3-5 years. The company has determined cloud video as its strategic direction, and has broad scope for strategic expansion around B-side video processing and interactive office scenarios, giving it a prudent recommendation - A rating. High growth in the cloud data center business can be expected. The company plans to acquire 100% of NetRunjieke's shares. Since 2014, NetRunjieke has been making efforts to transform cloud data center construction and operation and maintenance to provide enterprise customers with cloud data center network construction, security systems and application delivery system construction services, as well as operation and maintenance services such as maintenance, upgrade, and troubleshooting. Its self-developed cloud computing resource management platform has already been applied in practice. Since 2014, the share of cloud computing IaaS infrastructure construction services and data center operation and maintenance services in NetRunjieke's revenue structure has risen sharply, reaching 35% and 15%, respectively, and the comprehensive gross margin has risen to 20.4%. We believe that the company can provide private cloud construction and traditional data center transformation services. Core customers include Internet companies such as Youku Tudou, Qihu 360, and LeTV Network, and their service capabilities and channel capabilities have been confirmed. At the same time, China's private cloud construction and data center cloudification have entered a stage of rapid expansion (penetration rate over 10%), and downstream demand is exploding, which will drive a high increase in its performance. NetRun received 160 million orders in 2016, and is likely to complete 25 million pairs of gambling results. Further, we believe that its 17-18 performance promises are conservative, and that rapid growth in 3-5 years can be expected. Focus on developing cloud video services. Zhenshitong sells multimedia video solutions, has strong technology accumulation in the field of video transmission, has a deep customer base in the fields of energy, government, finance, etc., and serves one-quarter of the State Council's ministries and departments, and one-third of state-owned enterprises. The company has clarified that cloud video is the strategic direction, that is, it uses SaaS to provide enterprise customers with video search, analysis, on-demand broadcasting and other services, which can not only achieve flexible on-demand services for medium and large customers, but also provide cost-effective solutions for small and medium-sized enterprises. We believe that the company's medium and large customers have strong resources and have an accurate grasp of their needs (the cloud training business is a targeted solution), but the level of customer acceptance needs to be gradually cultivated, and the competitive landscape for small to medium customers is expected to be intense. There is plenty of room for strategic expansion. The company's strategy will revolve around IT+multimedia. Due to the rapid growth of video content in Internet transmission, and the prospects for multimedia interactive offices such as live streaming and VR are extremely broad, the company's strategic expansion space is huge, and it is expected that it will include many solution fields such as front-end video processing, transmission, and sharing. Prudent recommendation - A rating. Assuming that NetRunjieke combined the list in '17 and considered issuing an additional diluted share capital of 9.21 million shares; it is estimated that the EPS for 16-18 would be 0.92/1.43/1.80 yuan, corresponding to 102.6/65.8/52.3 times PE, respectively, giving a prudent recommendation - A investment rating. Risk warning: NetRunjieke's business is not progressing as expected, and Cloud Video is facing fierce competition.