Peace viewpoint:

The growth rate slowed down in the third quarter, and the performance was in line with expectations: during the reporting period, the company achieved 273 million yuan in revenue, 27.11 million yuan in net profit and 26.23 million yuan in non-return net profit, up 4.83%, 3.01% and 5.07%, respectively, compared with the previous two quarters. The main reason is that the construction cycle of the company's engineering project is long, and the uncertainty of the settlement point affects the recognition time of the corresponding revenue. Therefore, there are obvious fluctuations between quarters. From the beginning of the year to the end of the reporting period, the company achieved a total revenue of 760 million yuan, a net profit of 60.54 million yuan and a non-return net profit of 52.24 million yuan, with year-on-year growth rates of 38.36%, 12.68% and 26.91%, respectively. the decrease in non-recurrent profit and loss compared with the same period last year was mainly due to losses on the disposal of non-current assets.

The company's operating condition is sound, and it is expected that the annual performance growth rate will remain stable: in terms of operation, the company's actual business development is stable and there are no major fluctuations. However, affected by the uncertainty of the settlement time of the company's engineering project, in the three quarterly reports, the company expects the annual return net profit range of 5560 to 90.34 million yuan, corresponding to a year-on-year growth range of-20% to 30%. However, since the company's projects are usually paid for by the government budget, 60% of the profits of the previous year are very concentrated in the fourth quarter, so it is expected that the growth rate of the company's full-year net profit will remain at about 20%, similar to the previous year.

Major asset restructuring terminated for some reason, the company may continue to seek extension growth opportunities: from April to July this year, the company had planned a major restructuring with Softcom Power, but eventually terminated for some reason. In addition, the company also planned major restructuring projects with Anhui Radio and Television and other high-quality enterprises in 2014 and 2012-2015, but none of them took place. We judge that the company still has a strong desire to achieve transformation through mergers and acquisitions and to create value for shareholders and employees, and it is expected that after the end of the commitment period in January next year, the company will continue to seek high-quality assets as the object of mergers and acquisitions, with a high probability of IT peers.

With the release of the employee stock ownership plan, the incentive mechanism is expected to be strengthened: the company announced the first draft employee stock ownership plan and management measures on September 22, which has been examined and approved by the board of directors and shareholders' meeting. The implementation of the employee stock ownership plan is an important step to improve the incentive mechanism of the company, which helps to further bind the individual interests of employees to the overall interests of the company, improve the cohesion of employees and the competitiveness of the company, and mobilize the enthusiasm of managers and employees. According to the employee stock ownership plan, the maximum amount of funds raised is 75 million yuan, and the participants are the company's directors, supervisors, senior managers, the core business backbone of the company and its subsidiaries, with a total of no more than 310. it can reach about 30% of the total number of employees, which is enough to have a significant incentive effect. Moreover, the plan acquires and holds the underlying stock by means of secondary market purchase, instead of adopting a hierarchical structure, which demonstrates the confidence in the company's development prospects and forms a strong support for the stock price.

Accelerate the pace of expansion and transformation, and strive to achieve sustainable growth: as the leading enterprise of domestic transportation informatization, the company not only has the advantages of technology, experience and customer resources, but also forms an accurate judgment of the industry trend. At present, the company is in the stage of strategic expansion and transformation-in the field of highway informatization, the company is actively integrating into national development strategies such as "Belt and Road Initiative" and "Yangtze River Economic Belt". At the same time, the operation and maintenance business of the stock road is taken as the focus of development; in the field of port shipping information, the company is closely following the national "Belt and Road Initiative" strategy to expand overseas, and take the African and Latin American markets as the key targets. In terms of innovative business, the company is involved in the field of vehicle networking, is committed to developing V2X technology to realize vehicle-road coordination, and tries to expand the company's industrial chain layout in the field of transportation and port shipping with "Internet +" business. fully tap the potential value of traditional business, in order to achieve transformation and upgrading.

Profit forecast and investment advice: we maintain our previous profit forecast. We expect the EPS from 2016 to 2018 to be 0.24,0.29,0.36 yuan respectively, and the PE corresponding to the closing price on October 21 is 62.7,51.7,42.6 times respectively. We believe that the company has obvious advantages in terms of technology, experience and customer resources in market segmentation, and is optimistic about the company's strategic deployment in business development and efforts to seek extension growth. the improvement of the incentive mechanism by the introduction of the employee stock ownership plan has added additional impetus to the company's long-term development. We are optimistic about the development prospects of the company and continue to give "recommended" ratings.

Risk hints: the scale of infrastructure investment in the transportation sector has shrunk, the growth rate of the incremental market has slowed down; competition in the industry has intensified, business expansion has been hindered; policies related to mergers and acquisitions have changed, and the company's extension growth path is limited.