Items:

The company announced that it intends to issue no more than 38.78 million shares in non-public offering, the offering price is not less than 14.07 yuan per share, and the total amount of funds raised is not more than 546 million yuan, which is used for the consumption terminal security management platform of medical insurance fund, the safe access solution of NB-IoT technology, the transformation and upgrading of production intelligence and supplementary working capital.

Main viewpoints

1. Raise 546 million funds and actively distribute emerging areas such as the Internet of things.

The company will issue additional shares in one year, with a base price of 14.07 per share. The net funds raised by the company are intended to be used for:

(1) Research and development project of secure access solution based on NB-IoT technology

(2) Construction and operation project of medical insurance fund consumer terminal security management platform

(3) the transformation and upgrading project of production intelligence, and (4) the supplementary liquidity project.

The largest part is 370 million invested in the health insurance fund consumer terminal security management platform construction and operation project, the total investment of the project is 419 million yuan.

2. Take eSIM as the entry point to build the Internet of things service access deployment and management platform

(1) eSIM: the cornerstone of the application of Internet of things. As the security unit of the Internet of things business system terminal, eSIM is located in the network terminal equipment layer, together with the Internet of things communication terminal to form the Internet of things user equipment, for Internet of things users to access the mobile network and provide services through the Internet of things services. Compared with the current traditional communication market, the Internet of things has higher requirements for low cost, miniaturization, security and stability of the SIM card, and the traditional SIM card is difficult to meet the requirements of the Internet of things. ESIM arises at the historic moment in this environment, because it is directly welded on the device chip of the Internet of things, on the one hand, the area can reach 1/4 of NanoSIM, which greatly broadens the scope of application of eSIM; on the other hand, integration with the chip reduces manufacturing costs and improves stability. The emergence of eSIM creates favorable conditions for the rapid development of the Internet of things.

Dongxin Peace's industrial investment in eSIM module is not only a new general integrated circuit card form, but also includes a series of system interfaces, platform research and development to support this new card form, as well as security and reliable business operation management.

(2) layout of Internet of things security: secure encryption based on sim card. Dongxin Peace will build a TEE trusted execution environment parallel and isolated from the mobile terminal operating system based on the hardware trust root of the user security identification module built into the main processor on the Internet of things terminal. TEE can minimize the security risk, protect the security state of the system, and provide a mechanism to collect, store and measure system integrity state information. In the complex application environment of the Internet of things, the security mechanism of data storage and interactive information of each type of application needs to be paid attention to, especially the core data communication.

(3) Internet of things service access deployment and management platform: take "user contract management" as the core. As the eSIM module is fixed in the terminal can not be plugged and can not be replaced at will, it has a certain impact on the production and use of the terminal. For this reason, many links in the traditional smart card issuance and management process for individual users are no longer suitable for the eSIM module, because there are personalized requirements in the card issuing process, such as number management, number configuration, number recovery and so on. Through the research and development of remote access deployment and operation supervision strategy, Dongxin Peace Plan forms a new remote management system, with "user contract management" as the core, and remotely configures and manages the terminal data in the smart card through the mobile communication network. to provide secure and reliable business services and operation management guarantee for end-users of the Internet of things.

3. Take the social security PSAM card as the entry point to lay out the new direction of the Internet of things: to build a security management and operation platform for medical insurance terminals.

The use of social security PSAM card makes cross-district payment and multi-application expansion possible, which is one of the necessary equipment for medical institutions in most areas to become the business network of using social security card. In the future, with the promotion of inter-provincial settlement, urban and rural coordination and other health care reform policies, the scope of use of social security PSAM card is expected to be further expanded. Dongxin Peace is one of the major manufacturers of social security cards and PSAM cards. By the end of 2015, the company had provided more than 150 million social security cards for human resources and social security systems in 24 provinces and cities. The company has a better understanding of the security of card environment for consumption of medical insurance funds, and has made full use of its accumulated R & D technology in smart cards and state secret algorithms to develop and complete the MPSP platform, which has obvious first-mover advantages. The core of the medical insurance terminal security management and operation platform built by the company is to realize the informationization of medical insurance fund supervision, so that regulators can obtain the location, amount, category and other related information of health insurance fund consumption in real time. This platform has been successfully piloted. The project plans to promote the construction and operation of MPSP platform in more than 80 prefecture-level cities across the country, build and install 160000 front equipment of MPSP platform and 80 background security management systems, and comprehensively start the operation of MPSP platform. The average annual income achieved in the year of stable operation of the project is expected to be about 250 million yuan.

4. Investment suggestions:

As one of the leading companies in the domestic smart card industry, the IPO will help the company transform from a hardware service provider of cards to a software platform, and lay out new areas of the Internet of things based on ESIM and social security PSAM card. We are optimistic about the transformation direction of the company, and predict that the company will have a recommended rating of 0.21,0.28 for 2016 and 2017eps respectively.