The company released its 2016 annual report on the evening of March 13, with an operating income of 1.15 billion yuan in 2016, an increase of 30.71 percent over the same period last year, and a net profit of 16.1933 million yuan, a decrease of 30.82 percent over the same period last year. Of this total, the revenue of home appliances was 807 million yuan, down 8.23% from the same period last year, and the net profit was 8.4402 million yuan. Dejing deducted 66.927 million yuan in non-net profit for the whole year of 2016, with a performance commitment completion rate of 111.55%.

Dejing profit exceeded expectations, safe mobile phone shipments are the bright spot. During the reporting period, the net profit of home appliance business was 8.4402 million yuan, down 63.30% from the same period last year. But the home appliance assets have been spun off, so the business can be ignored. Dejing 16-year revenue of 1.759 billion, deducting non-net profit of 66.927 million yuan, exceeding the expected performance commitment. We estimate that the sales revenue of secure mobile phones is about 170 million yuan, equivalent to 70, 000 to 80, 000 units. We believe that the first year of security mobile phone shipments reached such an order of magnitude, the follow-up business promotion will be very much to look forward to.

The security mobile phone industry will accelerate its volume. We judge that the market space for secure encrypted mobile phones in the special industry alone is more than 30 billion, and the market space is likely to double if the commercial market is taken into account. There are three reasons why the relevant companies and products in the industry failed to expand the market rapidly: national demand did not hit the ground, there are no nationally produced security encryption products, and failed to find effective industrial alliances to promote. However, we judge that these three factors are now mature, and the secure encryption mobile phone industry will accelerate the volume.

With the two wings flying together, the company's independence and industry mobile phones will have a bright future. The company will release two GOME phones in late March, of which the high-end K1 has won two awards for IF products and packaging. We judge that GOME phones are expected to increase rapidly with the support of Gome channels. In terms of secure mobile phones, Dejing and Spreadtrum, Zhongke Hongba and Yuanxin Technology have formed a strategic alliance and become the only partner in the field of secure mobile phones. It is expected that the number of business lines laid out by the company will be expanded rapidly in the next two years. We believe that all the businesses of the company are in a state of readiness and have unlimited prospects in the future.

The embryonic form of safe and intelligent ecological layout has emerged, and the strategic chess game is worth looking forward to. First of all, the company takes the security smartphone as the starting point to vigorously develop its own-brand communication products. The follow-up company takes information security as the starting point to provide secure communication solutions for various industries. Finally, the company will take "security intelligence" as the core, promote the development of own-brand mobile security intelligent terminals, and focus on providing secure and intelligent services for individuals, families and industries. Gradually form the development layout of "secure mobile phone-smart hardware-smart life-intelligent ecology", and become a leading professional intelligent terminal manufacturer and service provider in the industry.

We are optimistic about the follow-up development of the company and maintain the "highly recommended-A" rating. We expect the net profit of Sanlian Trading Company in 17-19 to be 124 million, 205 million and 267 million yuan, corresponding to EPS 0.49 yuan, 0.81 yuan and 1.06 yuan. The current share price of 18.28 yuan corresponds to 37 times, 23 times and 17 times PE, maintaining the "highly recommended-A" rating.