Huicong Network is a leading B2B e-commerce platform in China. Previously, the company mainly unilaterally provided various information display services for small and medium-sized enterprises. With the spread of Internet information, the company gradually upgraded from a single information display platform to a comprehensive platform with transactions and finance as the core, and built an O2O model combining online and offline, and entered the B2B2.0 era. The company also actively lays out the vertical B2B field to further strengthen member stickiness and improve industry service efficiency. Judging from the interim results, the company's transformation is progressing smoothly. In the first half of the year, the company completed a transaction volume of 15.2 billion yuan, but only 5.6 billion at the end of 2015. At the same time, the balance of loans granted by the company in the first half of this year was about 1.9 billion yuan. Judging from this pace of development, the company is likely to complete the target of 50 billion dollars in transactions and 2.5 billion dollars in loan balance this year. Investment highlights: B2B 2.0 transaction service upgrade. The company officially began the transformation to B2B 2.0 in 2014, and was upgraded on the basis of “trading brokerage”. It has successively launched value-added services such as “Enquiry Bao”, “Bidao King”, “Proxy Operation”, and Matching Teams, etc., and upgraded the relatively single fee system to a variety of tailored membership fee standards, optimizing the fee system and enhancing membership stickiness. The transaction-oriented B2B2.0 service has made the relationship between companies and merchants closer, which in turn has stimulated the company's B2B 1.0 business. In the B2B trillion-level market context, the company's Internet service business is expected to grow rapidly. Supply chain services enhance customer stickiness. Currently, the supply chain in the domestic B2B market is long, and small and medium-sized enterprises are also facing many problems of financing difficulties, inadequate credit systems, and high logistics costs. Supply chain services can achieve online integration of supply chain capital flow, information flow, logistics and service flow, effectively solving the financing difficulties of small and medium-sized enterprises. The company currently has three financial licenses from Jingu Agricultural Commercial Bank, Shenzhou Digital Huicong Small Loan Company, and Huicong Financial Leasing Company. It is also actively seeking a third-party payment license for the online transaction system “Huifubao”. In the future, the company can effectively enter the core of online transactions through supply chain services, improve transaction efficiency, enhance customer stickiness, and accumulate transaction data from various enterprises, laying the foundation for the future development of big data analysis. The first home appliance city was launched, improving the O2O ecosystem. Huicong Home Appliance City, the company's first O2O trade fair center, was officially opened on March 18. The project is an important layout for the company to accelerate its development to B2B 2.0. The Home Appliance City adopted a model of offline procurement and online transactions, with the intention of creating an integrated online trading and procurement platform. At present, the Home Appliance City has attracted more than 700 small and medium-sized enterprises to settle in, contributing 2.33 billion yuan in GMV in the first half of the year. The trade fair center has played an important role in increasing GMV and promoting online transactions. Huicong Home Appliance and E-Commerce Holding Group has successfully completed the MBO, that is, the executive team holds 40% of the shares and the company holds 60% of the shares. In the future, the home appliance business is expected to be spun off from the company and listed separately, which will also boost the company's overall valuation. Lay out the B2B vertical field and consolidate enterprise-grade services. The company actively lays out the B2B vertical field. After acquiring Zhongguancun Online, it has also successively invested in B2B platforms such as China Service Network, Fifth City, Centimeter Network, and China Model International. The in-depth layout of the vertical field enables the company to grasp transaction information within various industries at a deeper level, understand the needs of upstream and downstream enterprises, and at the same time enrich the company's product line and expand its own online transaction scale. In addition, the company has also invested in a number of B2B transactional startups and will gradually implement MBO for different industries. In the future, if these companies are successfully incubated, the company is expected to reap rich profits. Give it a “Recommended” rating, with a target price of HK$6.79. The company is determined to build a B2B e-commerce platform with transaction+finance as the core, so the Internet service business and financial services business will become the company's main profit growth points in the future. Based on the obvious results of the company's various upgrades in the first half of the year, we expect the company's 16E/17E annual revenue to be 1.23 billion yuan and 1.46 billion yuan. Since the company is in a period of transformation and has invested heavily in B2B 2.0, profit margins will be affected by this. Next year, various cost investment margins will be reduced, and profit margins are expected to slowly pick up. We expect the company's net profit for the year 16E/17E to be 110 million yuan and 160 million yuan, respectively, and EPS of HK$0.12 and HK$0.18, respectively. The company is a leading enterprise in the B2B e-commerce field. It has rich experience and contacts in the industry and enjoys a valuation premium. Based on the current price, we believe that the company's 2017 PEG value can be raised to 0.25, and the corresponding target price is HK$6.79. Compared with the current price, there is still room for 19% increase. For the first coverage, we gave the company a “recommended” rating. Risk disclosure: The domestic economy is declining, and the company invested heavily during the transformation period.