1. Overview of the incident. Recently, the company issued an announcement. The board of directors passed a bill to acquire part of the shares of Fujian Langfang Information Technology Co., Ltd. (“Fujian Langfang”) in cash to acquire 66% of the other party's shares with 1.8 million yuan. Fujian Langfang completed the target asset business change and filing procedures. 2. Analysis and judgment The leading transformation industry of identification devices is deeply rooted, and the mobile exhibition industry and financial medical self-service have developed rapidly. The company is a traditional leading enterprise in the field of identification. As the competitive pattern intensified and the gross margin of the industry declined due to the liberalization of the industry, the company began an active transformation in 2016, building deep industry applications around existing channels. Among them, the mobile exhibition industry and the banking and medical self-service business targeting the banking and medical industry developed well, and the revenue of the two businesses increased 11.7 times and 4.0 times, respectively, in 2016. The company continued to maintain an overall revenue growth rate of 45% and net profit of 106% in the first quarter of 2017. We believe that the company's transformation from a traditional business to a deep industry business has begun to bear fruit and will provide an important pillar of performance over the next few years. Additional software solutions, face recognition and intelligent sensing help the industry connect with the rapid development of the company's software-related business. Among them, the face recognition business and Etu Technology jointly set up a subsidiary, Shinsitu (the company holds 51% of the shares), and achieved a 3.1 times increase in revenue from this business in 2016. At the same time, the company is also cooperating with IBM Watson to actively create artificial intelligence solutions, which are expected to target B-side customers within the industry. We believe that the company has a good technical foundation and channel advantages, and that building related businesses in emerging fields through cooperation is of great benefit to enhancing the company's overall strength and achieving the company's next industry integration plan. Actively develop the direction of extension, and acquire related targets to supplement future growth capabilities. The company has recently begun epitaxial expansion, and plans to acquire related targets such as Innomicro and Fujian Langfang. Innomicro is engaged in R&D and sales of special wireless communication equipment in the safety, security, railway and other markets, etc., and has good qualifications and room for growth. We believe that the company's expansion direction based on the premise of focusing on endogenesis can lay a solid foundation for the company's long-term development. 3. The profit forecast and investment recommendations assume that Innomicro is on the same table for 2017. It is estimated that the company's EPS preparation for 2017 to 2019 will be 0.48 yuan, 0.82 yuan, and 1.32 yuan, respectively. The PE corresponding to the current stock price is 43X, 25X, and 16X, respectively. Considering that the artificial intelligence industry has great development prospects, the company's performance has returned to high growth and has high-quality channels and partners, the company was given 50-55 times PE in 2017, and a reasonable valuation of 24.0 yuan to 26.4 yuan for the next 12 months, giving the company a “highly recommended” rating. 4. Risk warning: New business customer expansion falls short of expectations; acquisition progress falls short of expectations; competitive landscape intensifies.