The performance is in line with expectations. The company announced that the operating income in 2016 was 521 million yuan, up 19% from the same period last year; the net profit belonging to listed companies was 30.0088 million yuan, down 21.53% from the same period last year; among them, the food circulation traceability business grew into the largest business, contributing revenue of 168 million yuan, up 15.35% over the same period last year; revenue of archival information business was 108 million yuan, up 16.72% over the same period last year The revenue of political and legal informatization business was 134 million yuan, down 11.81% from the same period last year. At the same time, the proportion of software has increased significantly, and the comprehensive gross profit margin has increased, which has evolved to high added value. It is worth noting that the R & D investment reached 54.71 million yuan, an increase of 21.92% over the same period last year, and all of it was expended. The continuous R & D investment shows that the company aims at the technological frontiers such as cloud computing and the Internet of things to consolidate the core technology and occupy the commanding heights of the industry. In addition, the first phase of the restricted stock incentive plan generates a share payment fee of 10.08 million yuan.

"Food circulation traceability, archives, politics and law" with one arrow and two wings as the main line, move forward steadily. Seven new pilot cities for meat and vegetable circulation traceability of the Ministry of Commerce were added in 2016, so far the company has entered 24 of the 58 pilot cities across the country, with a market share of more than 40%, and new provincial Chinese medicine circulation traceability projects in Qinghai and Liaoning, covering a variety of traceability targets, will benefit from the construction of food traceability system in thousands of counties and cities gradually radiated by pilot cities in the future. Taking advantage of the traditional archival business, the company has a market share of 64% in the central and provincial archives bureaus, and has changed to full-life cycle management such as business consulting, data services, archival trusteeship and the utilization of archival resources, developing a hosting cloud and establishing an archives cloud platform. In the field of political and legal informatization, the company focuses on judicial prisons. The "518 platform Project" of Jiangsu Prison Administration has become a national benchmark and has been deployed and promoted throughout the country. The market coverage in Shanghai and Jiangsu is as high as 100%.

Focus on the layout of food traceability, build a complete ecological chain. Card position Meat and vegetable Circulation traceability platform of the Ministry of Commerce. In 2016, the company successively invested and set up three companies to create an efficient food safety supply chain ecological circle: Taocai Cat started with the vegetable market to achieve accurate traceability of agricultural products; easy to batch fresh to promote online electronic settlement of wholesale links, opening up the traceability information chain from farming to retail. Traceability Cloud combines the traceability system of various parts of the company to collect quality traceability, circulation traceability and the last kilometer traceability data of agricultural products industry links such as breeding, production and processing, inspection and quarantine, wholesale, distribution and consumption, to open up the whole process traceability data chain, and then build a third-party traceability information big data service platform for government supervision, enterprise participation and cooperation, and consumer inquiry.

Investment advice: 2016 performance is in line with expectations, following the industrial spring breeze, positioning one arrow and two wings, focusing on the layout of food safety business, constantly promoting the traceability of the whole industry chain, multi-category traceability, 2G to 2B and 2C extension, full orders on hand, sitting on the benchmark project, continue to consolidate the leading position of archival, political and legal informatization. We expect the company's EPS from 2017 to 2018 to be 0.57,0.91 respectively, maintaining a "buy-A" investment rating with a six-month target price of 78 yuan.

Risk hint: business progress risk, food traceability national policy landing is not up to expectations.