Investment highlights Recently, Rongke Technology, a leading target for smart healthcare, announced that it plans to acquire 49% of Mijian Information's shares at a price of 202 million yuan to achieve wholly-owned ownership of Mijian Information (51% of its shares were acquired for 128 million yuan in September 2015). The latter promised that the audited net profit for 2016, 2017, and 2018 would not be less than RMB 23.27 million, RMB 30.7 million, and RMB 40.56 million, respectively. Established IT companies keep pace with the times and promote strategic transformation of smart medical care. Rongke Technology is an established industry application system and IT service provider in the industry. After gaining a foothold in traditional business, the company vigorously promoted its strategic transformation, integrated big data and cloud computing with medical IT as the main line, developed modern businesses such as smart medical care, health data, and intelligent integrated cloud, and connected software, systems, platforms, and data to achieve a wider range and higher level of profit. The acquisition of Mijian's information has been a source of strength, adding further strength to the business camp. Mijian Information, acquired by the company this time, is a leading provider of medical informatization solutions in China. It has several independent intellectual property rights, and its R&D strength is at the forefront of the industry. The company will take Mijian Information's revenue. On the one hand, it can use the resources accumulated by the latter to develop a business network outside the Northeast region and strive to cover more than 20 provinces across the country; on the other hand, Mijian Information will inject new energy into the company's R&D business and push the performance and functionality of clinical medical application products to a new level. In line with national policy trends, the smart medical industry has huge potential. We believe that in the process of population aging, improving the efficiency and quality of medical care and old-age services is a top priority for the government in solving people's livelihood problems and promoting social reforms. The technical strength and product experience accumulated by Rongke Technology over 10 years will provide a strong guarantee for the company to achieve strategic transformation. The collaborative development of external and endogenous development will also push the smart medical business into a fast track of growth and create considerable profits for the company. Valuation and ratings: We expect the company's 2016-2018 EPS to be 0.20 yuan, 0.31 yuan, and 0.43 yuan respectively, and the corresponding PE is 79 times, 52 times, and 37 times, respectively. The company is fully transitioning to smart medical care, and the medical-related business will become the company's largest business within the next 2-3 years. Considering the company's huge potential for growth and the possibility that Mijian's performance may exceed expectations, it is given an “increase in holdings” rating. Risk warning: risk of smart medical business promotion or failure to meet expectations, risk of macroeconomic weakness or slowing down the development of the medical industry, systemic risks, merger and acquisition companies' performance or failure to meet expectations, etc.