Key investment events: On the evening of April 27, the company officially announced its 2016 annual report: during the reporting period, the company achieved operating income of 1,028 million yuan, an increase of 33.80% over the previous year; realized net profit of 212 million yuan, an increase of 0.99% over the previous year; and realized net profit of 172 million yuan after deduction, an increase of 64.13% over the previous year. The education business revenue for the full year of 2016 was 662 million yuan, which has increased to 64.40%, making it the company's core strategic business. The company plans to distribute a cash dividend of 0.20 yuan for every 10 shares to all shareholders. The company also announced its 2017 quarterly report: from the beginning of the year to the end of the reporting period, the company achieved operating income of 295 million yuan, an increase of 33.88% over the previous year; realized net profit of 697.16,600 yuan, an increase of 2.06% over the previous year; and realized net profit after deduction of 67.1075 million yuan, an increase of 67.19% over the previous year. The company expects net profit of 129 million yuan to 168 million yuan in the first half of 2017, with a year-on-year change of 0% to 30%. The annual performance is in line with expectations, and the company's education ecosystem has achieved remarkable results. During the reporting period, the company achieved significant revenue growth, mainly because: on the one hand, the company's online education business is developing well; on the other hand, the company's collaboration with Shenzhen Haiyuntian Technology and Shandong Changzheng Education achieved good results after integration. In 2016, the company's education informatization achieved revenue of 219 million yuan, an increase of 219.44% over the previous year; K12 smart education achieved revenue of 273 million yuan, an increase of 13.73% over the previous year; and Yunbao achieved revenue of 170 million yuan, an increase of 654% over the previous year, with remarkable results in building an education ecosystem. On the other hand, the company achieved net profit of 212 million yuan, which is basically stable compared to last year. The main reason is that in the same period in 2015, the company consolidated the performance of Shanghai Huolong Information, increasing investment income by 82 million yuan. There was no such revenue during the reporting period. Excluding the impact of this investment income, the company's net profit attributable to shareholders of listed companies increased 63.1% year-on-year in 2016, and achieved a significant increase in performance throughout the year. The 2.0 product strives to create a home-nurturing ecosystem, and content and channels promote rapid expansion of preschool education services. Currently, Changzheng Education's traditional multimedia course package business covers more than 14,000 parks, including more than 7,000 paid schools, while the number of users of the Yunbao app exceeds 20 million. In 2016, the company began to make efforts on the preschool education content side, integrating classroom education through self-research and outsourcing to create its own preschool education system to provide high-quality preschool education content for the school. In terms of sales, the company previously relied more on distribution channels. In the future, the company will further expand the market through “self-built sales team+distribution channel construction”, bringing its own sales team closer to school managers and teachers. At the same time, in the past, the company mainly promoted teaching content through free media teaching equipment. Later, it will also use a more streamlined, boxed approach to multimedia teaching, thus speeding up the expansion of the company's products. In 2016, the company's local promotion team was added to 1,500 people, and the sales side will gain momentum rapidly. At the same time, the education committee channel service has increased to 20 provincial education commissions/150 prefectures and cities, and the school channel has covered 25,000 primary and secondary schools. The number of schools covered by the company's parks is expected to reach 50,000 in the next 3 years. The offline education and training business is developing rapidly, focusing on the cultivation of online entrance products, and “in-school+off-campus” is progressing hand in hand. 1) Offline education and training business: At present, the company has formed a well-known brand for essay writing and mathematics training in the province, and has set up 18 teaching sites in the province. Since its establishment around 12 years ago, the company's offline education and training business has been refined in various aspects such as content, products, and teachers, and has achieved rapid growth in revenue scale in recent years; 2) School entry products: mainly including the cloud campus platform and the four core applications of cloud classrooms, cloud testing, cloud reading, and cloud evaluation. The company's current focus on building the Tuowei Academy one-stop service open learning platform was officially launched in the second half of 2016, with more than 1.2 million registered users. Over 10,000 users who pay for weekend courses are online. At the same time, the company is also trying to accurately channel the resources and data accumulated in the education service business to third-party educational institutions outside the school. In the future, the company plans to expand further to 3-5 provinces, and use school entry products as the company's focus for cultivating business in the future. The “boutique” route of the mobile game business is beginning to bear fruit, and stable cash flow has helped the company's online education business continue to develop. In 2016, the company's heavy card strategy games, such as Crack the Three Kingdoms, Dragon Wars, and Sengoku Shura, achieved revenue of 215 million yuan, which remained stable; gross margin reached 71.65%, an increase of 16.55% over the same period last year. This year, the company will continue the “boutique” route, enhance leading and core competitiveness in segmented fields, and enable the mobile game business to contribute long-term stable cash flow to the company's development. The company plans to cooperate with the European and American art studio CAH to develop and produce a new Battle of the Gods game; secondly, combine the advantages of Japanese subsidiaries and the market environment where national comics are gradually growing to open up a new path of two-dimensional culture; currently, a two-dimensional product is in the development stage, and will participate in CP20 in the first half of this year to begin early product warm-up. Profit forecast and investment advice: We expect the company to achieve net profit attributable to the parent company in 17, 18, and 19 to be 282 million yuan, 3.49, and 428 million yuan respectively, with year-on-year increases of 33%, 24%, and 23%, respectively. The 2017-2019 EPS is 0.25, 0.31, and 0.39 yuan/share, respectively. Based on the company's pioneering layout in the education industry through independent research and development and mergers and acquisitions, it is expected that in the future, it will achieve rapid breakthroughs in preschool education and K12 education, and create an online education ecosystem for 0-18 year olds, thus opening up new growth space. At the same time, the company's mobile game sector will form stable support for the company's education business. We are firmly optimistic about the company's development potential and investment value, and maintain a “buy” rating. The target price is 17 yuan, corresponding to 68X2017PE. Risk warning: The risk of increased competition in the education industry; the risk that M&A companies' performance promises will not be fulfilled.