Key investment events: The company issued an announcement to adjust the non-public stock offering plan and corresponding employee stock ownership plans. The acquisition of Yixin Intelligence improves the IoT layout, and the adjustment of the non-public offering plan does not affect the acquisition: in order to enhance the overall profitability of the company's communications business, the company plans to purchase 100% of Yixin Smart's shares at a price of about 670 million yuan, of which 70% will be paid by means of targeted shares, with an issue price of 12.26 yuan/share; at the same time, it will raise supporting funds to pay cash consideration through the non-public offering of shares, and the issue price is 12.68 yuan/share. Currently, the company has adjusted the portion of supporting capital raised: 1) Huaxia Life will no longer participate in the subscription to raise supporting capital shares, and Guangfa Asset Management (Century Dingli No. 1 Targeted Asset Management Program) will reduce the subscription amount to about 133 million yuan; 2) The funds raised will all be used to pay one-chip smart cash consideration, and projects such as the original RFID chip-related projects and IoT industry big data projects will no longer be retained. The company's current adjustments did not involve adjustments to the target of the transaction, the subject of the transaction, or the transaction price, nor did it increase the amount of supporting capital raised. It did not constitute a major adjustment to the restructuring plan, and had little impact on the acquisition of Yixin Intelligence. Yixin Intelligence is a leading domestic application solution for industrial robots, RFID electronic tags and IoT industries based on RFID technology. It has strong technical resource reserves, can effectively extend the reach of the company's communication business, expand the content of vocational education and training services, and produce strong business synergy effects. The target company promised to achieve net profit of not less than 35 million yuan, 50 million, 60 million and 80 million yuan in 2016-2019, and achieved net profit of 36.28 million yuan after deduction in 2016, exceeding performance promises. Employee stock ownership plans have been adjusted, and coverage has been expanded. The company made corresponding adjustments to the employee stock ownership plan (the stock source is non-public shares raised to raise supporting capital, to be subscribed through the Century Dingli No. 1 Targeted Asset Management Plan): 1) the total share and capital of the shareholding plan was adjusted from “no more than 160 million shares and no more than 160 million yuan” to “no more than 1329.7 million shares and 1329.7 million yuan”; 2) the price and quantity of non-public shares were adjusted to 1,268 yuan/share and no more than 10.49 million shares; 3) the subscription ratio for non-directors and senior employees increased to 31.23%. However, the adjusted employee stock ownership plan covers a larger scope, which helps establish a long-term supervision mechanism for employees over the company's operations and management, fully mobilizes employees' enthusiasm and creativity, attracts and retains outstanding management talents and business backbone, and enhances the cohesion and competitiveness of the company's employees. Cost controls & government subsidies caused changes in the 2017 Q1 results. In the first quarter of 2017, the company achieved operating income of 170 million yuan, a year-on-year decrease of 6.7%, and net profit to mother of 31.13 million yuan, an increase of 30.5% over the previous year. In the case of a slight decline in operating income, the company achieved a relatively rapid increase in net profit to mother in the first quarter of 2017. The main reason for this phenomenon was 1) a year-on-year decrease of 6.1 million yuan in sales expenses, a decrease of 36.2%; 2) benefiting from an increase in government subsidy revenue, it recorded a total of 8.94 million yuan in non-operating income during the reporting period, an increase of 54% over the previous year. Strong orders for communication services are the backbone of the company's performance. Communications services are the company's traditional main business. It provides professional network testing, optimization, operation and maintenance products and services to communication operators, system equipment vendors, etc., and has developed into the largest measurement and testing instrument provider in the wireless communication field and the largest domestic wireless network service provider. In 2016, the company received 50% of China Telecom Group's 2016 meter (handheld road test software) procurement share and won bids for China Mobile's wireless network special optimization services and instrument procurement projects in many places. Strong production and sales led the communications service business to achieve revenue of 480 million yuan in 2016, an increase of 4.7% over the previous year, which is the backbone of the company's performance. Dingli University expanded smoothly, and vocational education grew steadily. In 2014, the company entered the field of vocational education through a merger and acquisition of Shanghai Zhixiang Information. Zhixiang Information specializes in the R&D, sales and related supporting and derivative services of IT vocational education training systems, IT project outsourcing services (industry-academia integration), etc., and co-manages the Dingli School business with domestic colleges and universities. 1) In 2016, the company cooperated to establish 10 Dingli Colleges, and 6 Dingli Colleges successfully carried out the recruitment of new students. In total, more than 3,200 Dingli College students were registered. In 2017, 15-20 Dingli colleges were planned to be built, with plans to exceed 20,000 students; 2) Introduce advanced German experience in vocational education and build 3 Dingli Sino-German International Colleges. The enrollment rate in 2017 was not less than 3,350 yuan/person. Dingli University positions ICT. Sino-German colleges form a differentiated layout based on Sino-foreign cooperation. As enrollment scale and per capita fees increase, the two will effectively increase the scale and profit level of the vocational education business. While expanding offline, the company completed the development of the online education platform “Knowledge New Network”. Zhixin Network is a career-oriented online education platform. In terms of functionality, it covers content such as online learning, practical training management, evaluation and certification, and academic affairs upgrades. It can share high-quality education resources among Dingli colleges on the basis of standardization of teaching activities, further improving the efficiency and effectiveness of teaching. In 2016, the company's vocational education business developed steadily, achieving revenue of 250 million yuan, an increase of 7.7% over the previous year. During the reporting period, Zhixiang Information completed net profit of 70.82 million yuan to the mother, fulfilling its performance promise. The education business has become an important source of profit for the company. Profit forecasting and investment advice. We expect the company's net profit to be 150 million yuan, 180 million yuan and 260 million yuan respectively in 2017-2019, with corresponding EPS of 0.30 yuan, 0.37 yuan, and 0.53 yuan respectively. The company's dual main business layout is steady, Dingli University is expanding smoothly, and future performance is worth looking forward to. We gave the company 40 times PE in 2017, corresponding to a target price of 12.00 yuan/share, for the first time coverage, and gave it an “increase in wealth” rating. Risk warning: the risk of a reduction in communications service business orders, the risk of Dingli University expanding or falling short of expectations.