2016 Semi-Annual Report: In the first half of 2016, the company achieved operating income of 140 million yuan, an increase of 46.28% over the previous year; net profit attributable to shareholders of listed companies was 22.5919 million yuan, turning a loss into a profit over the same period last year; basic earnings per share of 0.09 yuan. The reorganization of the business has had remarkable results, and the performance has turned a loss into a profit. After losing money in the previous year, the company actively rearranged its business in 2016: first, it vigorously developed the mobile game business and established a boutique game agency strategy. Currently, it has obtained distribution rights for various popular games such as EA, King, and Rovio. The mobile game business achieved revenue of 306.299 million yuan during the reporting period, an increase of 30.55% over the previous year. At the same time, through the integration and optimization of game teams, operating costs were reduced, and the gross margin of the business increased by 37.96%; secondly, it benefited from the rapid growth of WIFI resale and value-added traffic services, mobile Internet The industry's application business grew from 145.18 million yuan in the previous period to 369.432 million yuan, an increase of 154.46%, and gross margin also increased from 28.55% to 33.46%. Third, selective abandonment of mobile value-added services and mobile video services due to operational difficulties and shrinking scale focused on the refined and high-quality operation of virtual operators and the expansion of user resources. Set up a mobile Internet industry fund to actively seek investment opportunities. During the reporting period, the company and well-known investment companies such as Ping An Finance and Wonderful World jointly set up a mobile Internet industry merger and acquisition investment fund with an estimated scale of 500 million yuan, of which 150 million yuan was pledged by the company. The industry fund's investment areas include core equipment and overall application solutions for next-generation mobile communication systems, intelligent hardware, and mobile Internet services and applications. Among them, mobile Internet services and applications mainly involve fields such as video lottery cloud platforms, mobile games, etc., which are consistent with the company's ideas on business reorganization and layout, and are expected to form a synergistic effect with the company's original business and further accelerate the shift of the company's business focus to mobile Internet. Profit forecast and investment rating: In terms of valuation, we forecast the company's earnings per share for 2016-2018 to be 0.154 yuan, 0.244 yuan, and 0.343 yuan, respectively, and the corresponding PE is 130.05 times, 82.06 times, and 58.42 times. Since the current valuation is too high, we have given the company a “hold” rating, but at present, the company's reorganization and layout of the business have had remarkable results, and a series of operations in the capital market will accelerate the pace of the company's transformation to mobile Internet, so it is recommended that we continue to pay attention to the effects of the company's transformation. Risk warning: mobile game growth rate declines, business transformation falls short of expectations