Key investment events: The company released its 2016 annual report and achieved annual operating income of 1,321 billion yuan, an increase of 84.29% over the previous year; net profit attributable to shareholders of the parent company was 219 million yuan, an increase of 61.96% over the previous year. Extension was the main driving force, and gross margin declined. The company completed the acquisition of 100% shares of Huaxia Dentsu and Ruiyi Hengdong on November 20, 2015 and September 6, 2016. During the reporting period, the two subsidiaries consolidated net profits of RMB 65.43 million and RMB 5.4705 million respectively. After exclusion, the company's annual net profit was 148 million yuan, an increase of 9.72% compared to 2015. In 2016, the company achieved rapid growth in net profit based on endogenesis, with extended mergers and acquisitions as the main driving force. On the other hand, the company's gross sales margin fell 7.87% year on year, which in turn caused the net profit growth rate to be lower than the revenue growth rate. The layout is being developed from various aspects such as e-government and digital communication. During the reporting period, the company developed its business layout with e-government, group control, big data, and digital communication as the main directions. Through the acquisition of Huaxia Dentsu and Ruiyi Hengdong, the company has improved its layout in court e-government and social marketing. At the same time, the company set up a big data delivery center and a big data research institute, and integrated data from various business fields to lay the foundation for a series of services such as application development and integration of big data. The proposed acquisition of Shanghai Yitong will greatly increase profitability. The company announced earlier that it and the controlling shareholder Jiuqi Technology will acquire 100% of the shares of Shanghai Yitong and Shanghai Hengrui with 1.45 billion yuan in cash. Shanghai Yitong has a deep accumulation of mobile application technology and customer channels. At the same time, the target company promises that the net profit for 2016-2018 will not be less than 80 million yuan, 104 million yuan, and 135 million yuan. If the transaction is successfully implemented, it will help the company improve its mobile Internet layout and greatly enhance profitability. Profit forecast and investment advice: Without considering the impact of Shanghai Yitong, we gave the company the 2017-2019 EPS of 0.52, 0.65, and 0.80 yuan respectively, maintaining the “increase in holdings” rating. Risk warning: Market competition risk; M&A benefits fall short of expectations.