Recent major announcements: 1. Confirmation of restricted stock incentive grants The company announced on December 15 that restricted stock incentives were granted to 147 people, including directors, senior management, and core technology (business) executives. The number of restricted shares was 20.29 million shares, or 5.33 yuan/share. It accounted for 3.5% of the company's total share capital at the time of the announcement of the draft incentive plan. The restricted stock sale period granted by this incentive plan is 12 months from the date of grant. The assessment year for the lifting of sales restrictions in the incentive plan is the three fiscal years 2016-2018. Performance assessment targets were set based on the average net profit from 2013 to 2015, and a net profit growth rate of not less than 30%, 40%, and 50% for 2016-2018, respectively. 2. Acquisition of some shares in participating subsidiaries Zhejiang Security Control, a wholly-owned subsidiary of Security Control Technology, plans to acquire 21% of the shares of Hangzhou Taren Robotics Technology Co., Ltd. with its own capital of RMB 1.86 million. After the acquisition is completed, Zhejiang Security Control's shareholding ratio in other people's robots will increase from 9% to 30%. 3. Participating in the establishment of an industrial fund company announced that it intends to participate in the Sichuan Beautiful City Development Equity Investment Center initiated by Sichuan Dinghao Development Equity Investment Fund Management Co., Ltd. as a general partner. The size of the industrial fund is not less than RMB 500 million, and Security Control Technology will participate in the share subscription of the Industrial Fund with its own capital of no less than RMB 120 million as an inferior limited partner. The fund lasts for 8 years and will mainly invest in urban development, infrastructure, smart cities and other fields. This move can utilize the experience, capabilities and resources of professional investment institutions to accelerate the company's strategic development layout in the smart industry and enrich the company's products and services in the smart field. 4. Shareholders further commit that corporate shareholders, Beijing Hongji Chase, Beijing Honghaiqing, and natural person shareholder Li Xin, promise not to transfer the company shares held directly or indirectly within half a year from the date the original director Mr. Si Yiming and the former supervisor, Mr. Zhang Jianping, respectively, reported their resignation (November 24, 2016 to May 25, 2017). The additional shares promised not to be reduced accounted for 4.478% of the company's total share capital. Business analysis (1) Restricted stock grants. The non-oil and gas automation control sector will grow rapidly, and there is a possibility that the oil and gas sector will exceed expectations. The grant of restricted stock incentives for Security Control Technology has been completed, covering a wide range of incentives, including 147 serving directors, senior management, core technical cadres, and business executives. The assessment year for the incentive plan is the three fiscal years 2016-2018. Based on the average net profit from 2013 to 2015, the company's net profit growth rate for 2016-2018 is not less than 30%, 40%, and 50%, respectively. Motivation is not very difficult to complete. The company is the leading RTU for industrial IoT control equipment in China, and has now formed a situation of balanced development of the three major businesses of industrial automation, high-end oil service, and smart industries. Under the situation of low oil prices, the oil and gas sector will maintain steady growth, while the non-oil and gas sector is expected to achieve rapid growth, becoming a flashpoint for the company's performance. Non-oil and gas revenue will account for more than 30% this year, and is expected to increase significantly next year. Since the domestic oil and gas wellhead automation ratio is still low (only about 20%) and the localization rate of pipeline monitoring is not high, the company's traditional oil and gas market capacity still has more than 10 billion dollars to be developed. And if oil prices return to a higher position in the next 1-2 years, downstream recovery will cause the company's oil and gas business to return to relatively rapid growth in the medium term. (2) Set up industrial funds to actively expand smart city development channels. The company plans to establish a Sichuan Beautiful City Development Equity Investment Center with its own capital of 120 million yuan. In the future, it will mainly invest in urban development, infrastructure, smart cities and other fields. The company has now set up businesses such as smart grain storage, online environmental monitoring, and intelligent water services. In the semi-annual report, the smart industry achieved revenue of 36.1489 million yuan, an increase of 497.34% over the previous year. The establishment of an industrial fund will help broaden the development channels of the company's smart city business, accelerate the company's strategic development layout in the smart industry with the experience, capabilities and resources of professional investment institutions, and enrich the company's products and services in the smart field. (3) Invest in other people's robots to expand the business robot market. Security Control Technology used 18.06 million yuan to acquire 21% shares in others' robots to increase its service to the robot industry. The intelligent robot industry is currently one of the most promising industries. The company has increased its investment in the service robot industry and further improved the strategic layout of the industry. The overall business structure will be more diversified, and it is expected to be integrated with the company's technological accumulation in the field of industrial automation. Its human robots are mainly engaged in R&D, manufacturing and sales of intelligent service robots and related technical products. The main products include: commercial ground cleaning robots, intelligent navigation modules, and commercial service robots. Its human robot has a strong technical level and great potential for development. The new-generation large-scale driverless floor scrubber iscrubbot300 won the “Cleaning Equipment Science and Technology Innovation Award” at the 2016 China Cleaning Industry Brand Event of the China Qing Association in October. Service robots have broad application prospects in the field of smart cities. With the continuous increase in labor costs and the maturity of robotics technology, service robots will become an important basic guarantee for an intelligent, efficient and environmentally friendly society in the future. Revenue is expected to reach over 10 million in 2017. 3. Profit Expectations and Investment Suggestions Through the layout of the past two years, Security Control Technology has transformed from being solely engaged in oil and gas wellhead automation to a comprehensive solution provider integrating oil and gas automation, high-end oil services, and smart industries. 2016 is the first year that security control technology has entered a large-scale harvest period in non-oil and gas automation and smart industries, opening the ceiling for the company's growth. After completing capital market operations such as targeted additional financing, bond raising, and restricted stock incentives in 2016, next year will be a year for the company to achieve leaps and bounds in development. Facing great opportunities for the development of the Industrial Internet of Things, the company is in line with the rapid growth logic of small companies in large industries. Considering that completing the restricted stock incentive grant will increase incentive costs by 10 million levels, regardless of subsequent extended mergers and acquisitions, we fine-tuned the company's expected net profit for 2016-2018 to be 105 million yuan, 168 million yuan, and 239 million yuan, corresponding to diluted EPS of 0.18 yuan, 0.28 yuan, and 0.40 yuan, corresponding to 49 times PE, 31 times, and 22 times PE. Maintain the company's “buy” rating, with a target price of 15 yuan. Analysis of the rating ratio of relevant reports in the market shows that the investment recommendations of relevant reports in the market score 1 point for “buy”, 2 points for “increase holdings”, 3 points for “neutral”, and 4 points for “holdings reduction”. The final score is then calculated on average, which is used as a reference for the average investment recommendation in the market. The final rating compared to the average investment recommendation: 1.00 = buy; 1.01 - 2.0 = increase in holdings; 2.01 - 3.0 = neutral 3.01 - 4.0 = reduction in holdings