Incident: Runxin Technology released its semi-annual report: In the first half of 2016, the company's revenue was 619 million yuan, up 20.97% year on year, and net profit attributable to shareholders of listed companies was 23.29 million yuan, up 18.91% year on year. Key investment points: The leading domestic technology distributor company is one of the leading IC distributors in China. The distribution industry has two forms: catalog distributors and technology distributors, and the company is a technology-led sales distributor. The concentration of the IC design industry has been increasing in recent years, while downstream demand is very scattered. With the rise of consumer electronics products such as smartphones, the speed of product iteration has greatly accelerated; and after entering the Internet of Things era, product diversity has increased dramatically, all of which have challenged brand manufacturers to launch high-quality products in a timely manner. Therefore, for chips, brand manufacturers need not only supply channels, but also chip support design capabilities. As a technical distributor, Runxin Technology has designed and arranged the hugely sold chips of famous IC chip manufacturers such as Qualcomm Chuangruixun, Synopsys, NXP, Cisco, AVX/Kyocera, and Puss, which can effectively help downstream customers solve design problems. Connect core suppliers and customer resources to share that upstream and downstream growth companies plan to non-publicly issue no more than 13.5 million shares and raise no more than 817 million yuan for the new NXP product line project, Qualcomm Snapdragon processor IOT solution project, and Ruisheng Kaitai metal case integrated product line project. The company has always had a good cooperative relationship with NXP. After the merger of NXP and Freescale, the product line was greatly expanded, and its market strength was greatly enhanced. Through additional projects, the company quickly deepened design solutions around several major product lines of new NXP smart card ICs, secure payment, automotive electronics, wireless connectivity and sensor systems, discrete and logic devices, and quickly occupied the market with core chip suppliers. At the same time, for mobile phones, which is currently the largest market, the company cooperated with AAC to establish a product line of integrated structural components for acoustic, RF, and metal cases, and quickly achieve mass sales of products using the company's first-line customer resources accumulated over the years, including ZTE, LeTV, TCL, and Yulong Communications. In the era of the Internet of Things, the company's wireless connectivity business space is vast, and the number of smart hardware in the IoT era will grow rapidly. It is estimated that by 2020, there will be more than 25 billion IoT access devices. The company has always focused on product line layout around the Internet of Things. In June, the company signed a contract with Qualcomm to become a value-added service provider for Qualcomm's low-end Snapdragon processors and IoT application solutions. Qualcomm has been at the top of the smartphone chip market. After acquiring CSR, various connectivity technologies such as Qualcomm's WiFi, BLE, and LTE were at the leading level in the world. Demand for IoT connectivity has increased dramatically, and Qualcomm, as a leading company in the chip industry, is expected to achieve rapid growth in sales of chips in the IoT field. The company is devoting itself to laying out the Internet of Things around the Qualcomm product line. As demand for the Internet of Things gradually increases, the company's business will also usher in accelerated growth. Profit forecasting and investment ratings We believe that future smart devices will show a diversified trend, making the entire industry chain tend to have a specialized division of labor. At the same time, more and more hardware design companies will rely more on reference designs. The company has always been committed to strengthening its design service capabilities around rapidly growing markets such as wireless connectivity and automotive electronics. Once the company's reference design is adopted, it will form a relatively stable supply relationship. Therefore, we believe that the company's R&D investment in reference designs will form a solid moat, and in the future, the company is expected to share the broad growth space in China's Internet of Things, automotive electronics, etc. Without considering additional issuance factors, the company's EPS in 2016-2018 is expected to be 0.43, 0.55, and 0.73, corresponding PE is 179, 140, and 105 times. For the first time, coverage will be given an increase rating. Risk indicates that the market expansion of new products falls short of expectations; uncertain risk of implementation of additional products