To achieve a turnaround from losses to profits, and the performance has exceeded expectations. In the first three quarters of 2016, the company achieved operating income of 299 million yuan, an increase of 34.87% over the same period last year, and a net profit of 1.31 million yuan, an increase of 156.65%. In the third quarter, operating income was 117 million yuan, up 33.13% from the same period last year, and net profit was 13.02 million yuan, an increase of 31.21% over the same period last year. The company's performance in the first three quarters turned from deficit to profit, which exceeded expectations.

The three major businesses are growing rapidly and continue to win bid orders. In the first three quarters of 2016, the company's three major businesses, namely, traceability of food circulation, informatization of archives, and informationization of politics and law, developed steadily, maintained its position as a leader in the industry, and achieved rapid growth in business income. In addition, new contracts signed by the company in the first three quarters totaled 414.8471 million yuan, an increase of 24.79 percent over the same period last year. The company has successively won the bid for Shenyang meat and vegetable circulation traceability system construction pilot project (phase I) integrated turnkey project 39.98 million yuan, Xuchang government cloud construction project software and operation and maintenance service project 43.8 million yuan, reflecting the company's market brand value and strong development potential. will help steady growth in future performance.

Comprehensive layout of food traceability of the whole process, highlighting the strategic positioning of the company. Relying on the absolute advantage of the food traceability platform of the Ministry of Commerce, the company has recently set up three companies in conjunction with the actual controller to comprehensively build a traceability system of "from farmland / farm to dinner table". The details are as follows: 1) traceability Cloud Information Development Co., Ltd., registered capital 50 million yuan, to create a third-party traceability information big data service platform. 2) Yi Pai fresh Information Development Co., Ltd., with a registered capital of 50 million yuan, to create online electronic settlement in the wholesale link, to open up the traceability information chain from breeding to retail; 3) Taocao Information Development Co., Ltd., registered capital of 50 million yuan, to create an O2O trading service platform between the vegetable market and consumers to achieve the "last kilometer" accurate traceability. The company has realized the layout of the whole industry chain of food traceability from food cultivation and breeding to food sales.

Investment suggestion: the company grew faster than expected in the first three quarters, turned losses into profits, and its operating income grew rapidly. The company continues to win the bid order project to ensure the stable growth of future performance. Recently, the company has made a comprehensive layout of food traceability, which demonstrates the strategic orientation of "one arrow and two wings". From 2016 to 2017, the company's EPS is expected to be 0.78 and 0.98 respectively, maintaining the "buy-A" rating, with a six-month target price of 120 yuan.

Risk hint: Taobao cat operation is not up to expectations, food traceability national policy is not up to expectations.