Key investment points Lay out the entire lottery industry chain and transform a comprehensive printing service enterprise. After years of development, the company has evolved from a single bill industry enterprise to a comprehensive printing service enterprise. Revenue has remained at the level of 600 million to 700 million yuan in recent years, and increased to 860 million yuan in 2014 due to the explosion of the internet lottery business. After the company suspended the paperless lottery ticket purchasing business on February 25, 2015, revenue and net profit were greatly affected. In November 2015, the company acquired Kexin Shengcai and entered the instant invoicing sector, and gross margin will gradually rise. The company completed a fixed increase of 780 million yuan in September this year, providing abundant cash flow for the entire lottery industry chain. It invested in the “Lottery Internet of Things Intelligent Management and Application Project” and the “Electronic Lottery R&D Center Project” to further enhance the company's comprehensive printing service capabilities and advance the strategic process of the entire lottery industry chain. A wholly-owned subsidiary of Wuxi Shuanglong will further strengthen collaboration between the Lottery Internet of Things and the lottery business. As the implementing entity of the company's “Lottery IoT Intelligent Management and Application Project”, it will rely on the location advantages of East China and the policy advantages of the national IoT model city in Wuxi City to expand IoT application projects based on the main lottery business, increase customer stickiness, and increase revenue and profit levels. The project has been successfully piloted in Jiangsu Fucai. Since the company acquired 60% of the shares in Wuxi Shuanglong, relying on the platform of Hongbo Co., Ltd., the business of Wuxi Shuanglong has further developed and expanded. The operating conditions are good and stable, and they have all been able to fulfill their performance promises. Promoting mobile lottery sales to prepare for the future Dongfeng channel (lottery license) and lottery (content development) is a profit point for the Internet lottery industry. In terms of mobile channels, the company obtained the Fujian Sports Lottery Game and Gaming Platform Construction License and Telephone Lottery Distributor License last year. The company has now completed the development of the platform and is awaiting approval from the competent authorities. In terms of lottery, due to the lack of innovative lottery tickets in China, the company has laid out and prepared advance lottery research and development, including the “Electronic Lottery Research and Development Center Project”, which is expected to quickly occupy the market after the policy is opened up. The profit model of lottery is generally divided into a buyout type and a split type. Generally, the sales share ratio of the split type is 1-2%. Even if online lottery sales are not open for a short period of time, there are still ways to monetize lottery tickets. The company has invested heavily in lottery research and development, and has now stocked up a large number of lottery games. In addition to independent reporting and operation, the company can also act as a content provider to provide game products to other partners in the industry. Follow the general trend of telephone/internet lottery sales. In the first quarter of 2017, judging from recent Internet lottery policies and tenders, ministries and departments such as the Ministry of Finance, the Ministry of Civil Affairs, and the Two Lottery Center continued to try to improve the Internet lottery mechanism from the top down, and expectations for the reopening of online lottery tickets continued to heat up. Judging from the estimated completion time of each project, the first quarter of 2017 may become a critical time window for the opening of telephone lottery and internet lottery policies. The company has extensive experience in online lottery ticket sales and also has B2B and B2C qualifications. Prior to the restructuring of online lottery sales, the subsidiary obtained license to access lottery and sports lottery data from various provinces, and established cooperative relationships with lottery websites such as Tencent, Alipay, and Suning. After years of development, the profit forecasting, valuation and investment rating company has become one of the leading enterprises in the lottery printing industry, with a large and stable market share; in the Internet lottery industry chain, the company also has many years of experience, and has accumulated quite a bit in upstream lottery R&D and downstream distribution channels. We believe that as the profitability of the company's lottery printing business increases in the future and the synergy between the lottery IoT project and the main lottery business, the overall gross margin will gradually increase in 2016-2018. At the same time, if the Internet lottery policy is opened up in the future, the company's performance will explode. We expect the company's main business revenue in 2016-2018 to be 760/988/1136 million yuan, and EPS 0.02/0.09/0.13 yuan, respectively. The current stock price corresponding to the 2016-2018 PE is 1341/266/187 times, respectively. The target price remained at 32.5 yuan, and the investment rating maintained an “increase in holdings”. The risk indicates the uncertainty of the implementation of telephone and internet lottery ticket sales policies. The revenue of the thermal paper business did not meet expectations, and the IoT business process did not meet expectations.