The incident company released its 2016 annual report on the evening of April 15, 2017. The company achieved operating income of 846 million yuan in 2016, an increase of 28.10% over the previous year. Net profit attributable to shareholders of listed companies was RMB 12.68 million, up 38.22% year on year. The basic earnings per share are 0.04 yuan/share. The company plans to distribute a cash dividend of 0.15 yuan (tax included) for every 10 shares to all shareholders, and transfer 5 shares to all shareholders for every 10 shares using the capital reserve fund. Continuing to lay out the entire industry chain, the performance recovery company is the leading lottery printing enterprise in China. In 2016, the company's business covered lottery thermal ticket and instant invoicing printing, lottery product development and electronic lottery operation, ticket products and high-end packaging printing, RFID smart tags, and IoT services. After the internet lottery business was suspended in 2015, the company focused on laying out the entire lottery industry chain. In November 2015, the company acquired 51% of the shares of China Science and Technology Lottery, entering the field of ready-to-open sports lottery printing; in September 2016, the company completed a fixed increase of 780 million yuan, mainly for investment in the “Lottery Internet of Things Intelligent Management and Application Project” and the “Electronic Lottery R&D Center Project”. This fixed increase further promoted the strategic process of the entire lottery industry chain. At the end of 2015, the company acquired Zhongkecai to enter the instantaneous invoicing business. In 2016, the company's main business products, ticketing products, achieved revenue of 661 million yuan, an increase of 39.47% over the previous year, accounting for 78.12% of the company's main business revenue; packaging office paper revenue was 125 million yuan, an increase of 38.95% over the previous year, and consignment fees and other revenue of 60 million yuan, a decrease of 37.88% year on year. The gross margins for ticket products, packaged office paper, consignment fees, and others were 34.06%, 10.99%, and 30.13% respectively, up 7 pct, 3 pct, and 6 pct respectively over the same period last year. In addition, in 2016, the company transferred part of China Securities Credit Enhancement Co., Ltd.'s shares, achieving investment income of 9.45 million yuan before tax, significantly increasing net profit in 2016. In the future, the company will strengthen marketing, hoping to gain the main market share for thermal paper and instant invoicing printing on the premise of maintaining stable market prices. Internet lottery sales have been regulated for more than two years, and the policy trend is just around the corner. On February 25, 2015, the Ministry of Finance, the Ministry of Civil Affairs, and the General Administration of Sports jointly issued the “Notice on Issues Relating to Carrying Out Self-Investigation and Self-Correction Work for Unauthorized Use of Internet Lottery Ticket Sales”. On February 28, major lottery websites responded to the notice and stopped online lottery ticket sales business. The suspension of online lottery sales had a certain impact on the company's business. Operating income fell from 864 million yuan in 2014 to 661 million yuan in 2015, and net profit from 28 million yuan to 90 million yuan. Up to now, it has been over two years since internet lottery sales have been rectified, and people's expectations for the online lottery market are rising due to the promotion of sporting events, and recent policies and tenders related to internet lottery tickets have given a positive signal that online lottery sales have resumed. Under these circumstances, we maintain the expectation that online lottery sales will resume in 2017, when the company's performance will increase significantly. Profit forecast and investment recommendations We expect that in 2017-2019, the company's operating income will be 1.03 billion yuan, 1.3 billion yuan and 1.58 billion yuan respectively, net profit of 225 million yuan, 36 million yuan and 48 million yuan respectively, EPS will be 0.08 yuan, 0.11 yuan, and 0.14 yuan respectively, and the closing price corresponding to PE on April 17 will be 283 times, 203 times and 151 times, respectively, maintaining the “increase in holdings” rating. Risks indicate the risk that the liberalization of the Internet lottery policy will take less time than expected, the risk that competition in the industry will intensify, and the risk that the prosperity of the industry will decline.