Key investment points: LED small-pitch has entered an era of explosion, and the LED business is expected to maintain an impressive 30% growth: since 2016, the LED sector's small-pitch products have entered the market explosion period, and the company's small-pitch display equipment has entered a production capacity release period. The revenue growth rate of major companies is above 50%. The company's small-pitch business previously had a production capacity of about 300 million yuan, which is expected to gradually be released to the 1 billion level in 2017. At the same time, in terms of business development, the company focuses on serving middle and high-end high-quality customers to ensure business profit levels, benefiting from the release of industry demand. The share is expected to rise to 70% (around 30% in 2016). The LED sector has benefited from volume and price increases in the past two years (since 2015, the company's product sales and prices have increased by about 10% each year), and the gross margin of the sector's business has increased significantly (gross margin has increased year by year, with gross margin reaching 35.91% in 2016). Currently, the overseas LED business still accounts for more than half (about 57%). The expansion of the domestic market in 2016 paid off, with a growth rate of 39%. Therefore, in the context of the recovery of the LED sector, the release of production capacity in the company's small-pitch business has promoted market expansion, and volume, price and profitability have increased significantly, and it is expected to maintain a considerable growth rate of more than 30% over the next two years. The marketing layout is beginning, integration and collaboration are accelerated, and cash flow+debt issuance addresses the capital requirements for continued industrial integration: Based on the company's original LED business being extended to the downstream end, the company actively expands the digital outdoor and digital marketing sectors to achieve online and offline integration of the marketing sector and create an existing marketing layout around “display equipment, offline advertising, marketing planning, online advertising and collaborative user data”. Currently, the offline advertising aspect has formed an offline marketing camp composed of 8 offline advertising companies including time-sharing media, fully integrating the advantages of online media resources such as the company's display equipment. The side has successively acquired Shenzhen Limar and Precise Audience. The marketing planning level uses Youtuo PR, Litang Marketing, etc. to carry out resource integration and plan planning, and the group level has set up a strategic planning department to carry out overall planning for the Group's marketing strategy and the future strategy of the subsidiaries. Currently, various subsidiaries are beginning to see integrated and synergistic effects, and they are committed to building the Group's digital marketing platform in the medium to long term. As the secondary market recovers, leading to the return of investment valuations in the primary market, we believe that the marketing industry's logic of achieving industrial integration based on mergers and acquisitions has not changed in the medium to long term, but it places higher demands on post-investment management and integration. In the short term, the tightening of refinancing policies poses challenges to the financing capacity of companies that carry out industrial mergers and acquisitions, and the industrial logic of integrating companies with good financing capabilities and strong endogenous hematopoietic function will continue to be verified by the market. The company's current endogenous profit scale is over 500 million yuan, providing a steady increase in endogenous cash flow. The balance ratio is about 27%, which is at a low level in the same industry. Previously, the company announced that it would issue no more than 2 billion yuan in 5 years. With sufficient endogenous cash flow and low leverage ratio, bond issuance financing is conducive to solving the company's capital requirements for continuing industrial integration. Executives' holdings reduction plans and newly unbanned shares before mid-October totaled about 49 million shares, far lower than the 140 million shares that were lifted at maturity. Employee holdings and share repurchases showed confidence: the company's shares were unbanned in May 2017 (only 4.35 million shares are actually tradable shares), and the ban on about 116 million shares will be lifted in July (all of them are major shareholders and specific shareholders holding shares that are not publicly issued shares). All of these unbanned shareholders fall under the current new policy restrictions, considering the company's reduced holdings in 2016 Major shareholders announced in December Looking at the 12-month holdings reduction plan (when the stock price is higher than 27 yuan, shareholders holding 52% of the shares promise to reduce their holdings by no more than 70.2 million shares in total, and mainly in bulk transactions, that is, if the stock price falls below 27 yuan, they will not reduce their holdings during the period). Looking at the comprehensive reduction plan for new shares, newly unbanned shares, and the executive promised holdings reduction plan, the total holdings reduction plan within the current price in the past three months is only 48.98 million shares (including 24.12 million shares that have expired on May 4, which are permitted under the new holdings reduction policy at the current price and meet the promised price reduction range Approximately 2.72 million shares, so The main qualifying conditions for reducing holdings are stock tradable shares and some restricted shares that were lifted in July, so the three-month period was mainly up to mid-October), accounting for 7.98% of the total share capital, far lower than the 70.72 million shares planned at the end of 2016, the 140 million shares newly lifted this year, and about 70 million newly unbanned shares that can be transferred at auction within three months of reducing new holdings. As can be seen, the price range and quantity limit promised by executives to reduce their holdings, new regulations to reduce their holdings, and restrictions on how to reduce their holdings when executives left their jobs until mid-October were less than 8% of the total share capital, far lower than the 22.8% share capital of the newly lifted ban. The pressure to lift the ban and reduce their holdings was greatly alleviated. At the same time, at this point, the company once again initiated a stock repurchase of 240 million yuan (the maximum repurchase price was 24.8 yuan, with a cumulative repurchase amount of about 45 million yuan as of June 3) to be used as the second phase of employees' shareholding reserve shares. We believe that the company's multiple initiatives have shown confidence in the company's development and stock price increase. Profit forecast and valuation: It is expected that as small-pitch business growth accelerates, the performance contribution of traditional sectors increases, and in 2016, many new targets have been added to the marketing sector. We predict that in 2017-2019, the company will achieve net profit of 5.58, 6.81, and 814 million yuan, respectively, with EPS of 0.91, 1.11, and 1.33 yuan/share, respectively. Considering the impact of the new policy to reduce holdings and volume-price promises from senior directors and supervisors, etc., concerns about the drastic lifting of the ban on restricted shares have been drastically reduced. The company's recent share repurchase shows confidence in stock prices (the repurchase price is 24.8 yuan/share, the promised price reduction price is not less than 27 yuan, higher than the current stock price of 19.99 yuan/share). The company's business extension industry layout continues to advance, strengthening the integration and collaboration of targets. We covered it for the first time and gave it a highly recommended rating. Risk warning: the risk that the market will continue to decline, the risk that gambling performance will not meet expectations, the risk that mergers and acquisitions will not meet expectations, LED business development will not be smooth, etc.