The Investment Advisory Company released its 2016 annual report on the evening of March 27. It achieved full-year operating income of 799 million yuan, up 91.06% year on year; realized net profit attributable to shareholders of listed companies of 150 million yuan, up 725.36% year on year; net profit attributable to shareholders of the parent company after deduction was 16.69 million yuan, up 48.85% year on year; and basic earnings per share of 0.26 yuan, up 570.92% year on year. The company's revenue growth is in line with previous expectations. The main reason for the increase in revenue is the merger effect brought about by the company's extended mergers and acquisitions. Considering that the company will rely on the existing digital marketing network and enterprise-level SaaS layout and gradually expand to other segments of enterprise-grade Internet services to build an enterprise-grade Internet service platform, the implementation of later projects is worth looking forward to. We predict that the company's 2017-2019 EPS will be 0.20 yuan, 0.26 yuan and 0.33 yuan respectively, corresponding to the current stock price PE of 62x, 48x and 37x respectively, covering the “recommended” rating for the first time. Key investment points The company's performance increased dramatically, and the effect was significant. The company's revenue increased dramatically in 2016, achieving annual revenue of 799 million yuan, an increase of 91.06% over the previous year. There were major changes in the company's business and profit structure during the reporting period. In November 2015, the company combined three digital marketing companies, including Shunwei Advertising, Qizi Advertising, and Lixuan Advertising. The combined revenue of the three contributed 534 million yuan, accounting for 66.81% of revenue, and 72.55 million in profit, accounting for 48.37% of the mother's net profit. The three companies fulfilled their respective performance commitments. The company's traditional business revenue was 260 million yuan, down 13.27% from the previous year. The share of main business revenue has dropped from 70% in the same period last year to 31.54%, and the company continues to reduce the scale of traditional business. In terms of gross margin, digital marketing was only fully consolidated in 2016. Its gross margin was 26.40%. Through a horizontal comparison, the gross margin of the company's digital marketing business was already at the middle and upper reaches of the industry; the gross margin of the company's traditional industrial business was 21.44%. While revenue declined, gross margin increased 5.67% year on year, reflecting the small but beautiful strategic transformation of the company's traditional business. In terms of expenses, sales and management expenses have increased significantly due to merger factors. Among them, the growth rate of sales expenses is higher than the growth rate of revenue. The main reason is that sales development in the digital marketing business, and the growth rate of management expenses is less than the growth rate of revenue. During the reporting period, the company sold its wholly-owned subsidiary Yuantong Incubation to Risheng Investment. Since July 2016, it has not been included in the consolidated statement, while contributing nearly 108 million yuan in non-recurring profits to the company. The traditional business is small but beautiful. Continuously optimizing the company's traditional business, the LED lighting industry and the EMS industry, have achieved full market competition. Competition in the industry is extremely intense. In the future, the LED lighting industry will show development trends such as slowing demand growth, declining profit space, and mergers and acquisitions integration. The EMS industry as a whole faces a slowing growth rate and low prosperity. Therefore, in 2014, the company established the strategic goal of transforming the Internet industry and implemented a small but beautiful development strategy for current business companies. Shiida Technology, which carries the lighting business, has completed listing on the new third board, which will facilitate its future use of capital markets and broaden its investment and financing capabilities. The customer structure of the EMS business has been further adjusted and optimized, and some customers with low profit margins have been eliminated. From digital marketing to enterprise-level SaaS, after the company that built an enterprise-level Internet service platform decided to transform the Internet, it acquired three digital marketing companies using digital marketing as an entry point, and expanded into the enterprise-level SaaS service industry. In 2016, the company invested in leading companies in the SaaS vertical field to win marketing and six degrees of integration. The former focuses on the vertical field of consumer goods brand customers, while the latter focuses on general enterprise services. In the future, it will also rely on digital marketing and enterprise-level SaaS to gradually expand to other segments of enterprise-level Internet services and build an enterprise-level Internet service platform to provide customers with more professional, higher quality, and more comprehensive services. Risk warning: risk of loss of major customers, acquisition targets falling short of expectations, risk of company business integration