Incident: On July 21, 2016, the company issued an announcement that Guangdian Information Development Co., Ltd., a wholly-owned subsidiary, plans to jointly invest 50 million yuan with Zhang Shuhua, the actual controller, and Shanghai CITIC Electronics Development Co., Ltd. and major shareholder Shanghai CITIC Electronics Development Co., Ltd. to establish Taocaimao Information Development Co., Ltd. Among them, Guangdian Information has invested 10 million yuan in monetary and non-monetary assets, accounting for 20% of the shares. Comment: The strategic layout of the “last mile” creates a closed loop of food traceability. TaocaiMao focuses on the core scenario in the agricultural product distribution chain - vegetable market transactions. By building a third-party O2O trading service platform serving the vegetable market and vegetable merchants, Taocai Mao, on the one hand, boosts the performance of the vegetable business, and on the other hand, provides consumers with convenient services to buy safe, fresh fruits, vegetables, meat and poultry without leaving their homes. The platform matches information flow, capital flow, logistics and other information to ensure the truth and reliability of traceability information, thus achieving accurate “last mile” traceability of agricultural products. This is an important part of the company's construction of a full-process traceability system from farmland to table under the guidance of the national food safety strategy. ToG was extended to ToC, and the food traceability business model was fully upgraded. The company built food distribution traceability platforms in nearly 20 pilot cities led by the Ministry of Commerce during the “12th Five-Year Plan” period, with a market share of about 40%, establishing a leading position in the field of food traceability. The company leverages the advantages of city-level traceability platforms, uses “scavenging cats” as a starting point, and has a downstream C-side layout, which is conducive to improving the revenue structure, breaking through revenue bottlenecks, and upgrading the business model. Taking Shanghai as an example, the city's annual agricultural product terminal consumption is conservatively estimated at about 200 billion yuan, and the theoretical profit margin of a third-party traceable O2O trading platform will exceed 2 billion yuan. Food traceability is the main focus, files, and political and legal management are added to create experts in information resource management. The company has basically formed an information resource management ecosystem oriented to food safety (traceability), civilized safety (archives), and social security (politics and law) with “food traceability, files, and law” as the main line of industry, and the Internet of Things, big data, cloud computing and other technologies as its core competitiveness. The company will use its pioneering and card position advantages in various fields to accelerate the replication and expansion of segmented regions and industries, use the power of capital to integrate industry resources, and continue to maintain its leading position in the market. Investment advice: As a leader in the field of food traceability, the company responds positively to the national food safety strategy. The establishment of Taocai Cat is an important layout for the company in the field of food traceability, which will help open up revenue space and upgrade the business model. Considering its steady development in archives and judicial informatization, we are optimistic about the company's long-term development. The 2016-2017 EPS is expected to be 0.80 or 1.00 yuan, giving it a “buy-A” rating for the first time, with a target price of 140 yuan for 6 months. Risk warning: The operation of Baocai Cat falls short of expectations.