Incidents: The company released its 2016 semi-annual report. In the first half of the year, the company's operating income was 220 million yuan, up 11.6% year on year, operating profit was 11.375 million yuan, down 26.4% year on year, net profit was 13.585 million yuan, down 23.2% year on year, net profit after deduction of 13.54 million yuan, down 8.7% year on year; revenue for the second quarter was 130 million yuan, up 8.1% year on year, and net profit was 9.454 million yuan, down 23.2% year on year. Considering the seasonal factors of the industry, the increase in R&D expenses during the transition period, and the high level of non-recurring profit and loss in the same period last year, the company's performance is generally in line with expectations. The economy is sluggish, integrated business is under pressure, and the company's product structure is being adjusted. The company's traditional integrated business is mainly concentrated in the Northeast region, especially in Liaoning Province. Northeast China's economy is sluggish, and population exodus is serious, which has affected the release of integrated business orders to a certain extent. Affected by the general environment, the company's financial IT outsourcing services fell 54.2% year on year, and the gross margin of the data center third-party service business was also affected, falling 3.3 percentage points. As a result, the company is also actively promoting the layout of new business fields and increasing investment in the smart medical sector. The company's industry informatization solutions benefited from the increase in business revenue in the smart medical sector combined with Mijian Information, an increase of 14.1% over the previous year and an increase in gross margin of 2.9 percentage points. The transformation of smart medical care continues to advance, and the prospects are promising. The company continued to increase R&D investment in the smart medical sector, investing 16.601 million yuan in R&D during the reporting period, an increase of 37.3% over the previous year. The company focuses on investing in clinical information system (CIS) product research and development. CIS products such as ICU, hand numbness, emergency care, and hemodialysis have further matured, and actively deployed AI+ medical care, established expert think tanks, and continuously raised the company's core competitiveness threshold in the field of smart medical care. The company's major asset restructuring work to acquire the remaining 49% of Mijian Information's shares is also progressing in an orderly manner. The medical informatization industry continues to be prosperous, and the company's layout of diagnostic information systems and “intelligent integrated clouds” has a card slot advantage. The government continues to increase its support for medical and health services and the medical informatization industry. Currently, the basic layout of medical information systems in provincial and municipal hospitals is relatively complete, HIS, PACS and other systems are in place, and informatization requirements have been upgraded. The diagnostic information systems of subdepartments are currently penetrating tertiary hospitals and forming a demonstration effect, forming a demonstration effect, rapid promotion, and orders are expected to explode; in the first half of the year, the country's policy on hierarchical diagnosis and treatment and family doctors will be issued, promoting the promotion and popularization of information systems in primary hospitals and health centers, and stimulating the introduction and construction of cloud-based collaborative diagnosis and treatment information systems. Mijian Information acquired by the company is a leading enterprise in the CIS system. It has mature CIS products for emergency care, hand anesthesia, and ICU, and actively lays out data platform-level products based on cloud architecture. The company also lays out the CIS for nursing and hemodialysis departments to form a smart medical layout with complementary products and channel sharing. It has a card slot advantage, and performance is expected to explode. Profit forecast and investment advice: Considering the impact of the company's performance in the first half of the year on the whole year, the company's profit forecast was lowered accordingly. The company's 2016-2018 EPS is expected to be 0.17 yuan, 0.23 yuan, and 0.30 yuan respectively, and the compound growth rate of net profit for the next three years will be 26.8%. The company is currently in a period of transformation. We are optimistic about the company's future layout in smart medical care and maintain an “increased holding” rating. Risk warning: Risks such as continued market downturn, product promotion or failure to meet expectations, and market competition or intensification.