Incidents: The company recently announced its financial report for the first half of 2016. In the first half of 2016, the company achieved operating income of 596 million yuan, an increase of 86.1% over the same period last year; realized total profit of 17.653 million yuan, an increase of 60.1% over the same period last year; and realized net profit of 10.206 million yuan, an increase of 2.4% over the same period last year. Performance is growing steadily, and the financial electronics business is expected to expand in the second half of the year. There are two reasons for the increase in the company's revenue during the reporting period: 1) the implementation of large orders for lighting electronics (LED) and contract energy management businesses led to significant revenue growth, with year-on-year increases of 454.8% and 1011.8% respectively; 2) the company's IDC data center in Nansha, Guangzhou was put into operation, adding 60.43 million yuan in IDC revenue to the company. The company's expenses increased rapidly. Management expenses and financial expenses increased by 43.6% and 297.8% respectively during the reporting period, and overall gross margin decreased by 6 percentage points year-on-year to 28.8%. The performance of the company's financial electronic business was poor during the reporting period. The revenue of encrypted keyboards, self-service terminals, and smart POS products varied by 12.6%, 16.6%, and -35.1%, respectively. However, we expect that the financial electronic business will still perform well throughout the year, with sales growth of more than 30%. The reason is: 1) the financial electronics business has seasonal characteristics, and revenue recognition is mainly concentrated in the second half of the year; 2) the company's smart teller machines and smart POS products both generated large orders from banks in the second half of the year, and will achieve significant volume. Actively promote IDC business and build a second main business. The company acquired 70% of Yunshuo Technology's shares in 2014, gradually positioning IDC and cloud computing businesses as the company's core business segments. The company issued an announcement during the reporting period. It plans to invest 100 million yuan to establish a wholly-owned subsidiary, Shenzhen Zentong Cloud Computing Co., Ltd., in Shenzhen to be responsible for the construction and operation of the IDC data center in Shenzhen, which will help further expand the scale of the company's IDC business and improve the layout of the company's data center in Guangdong. The Guangzhou Nansha data center (with 3,700 cabinets) was put into operation during the reporting period, and data centers in Shenzhen and Changsha are under construction. In the next three years, the company plans to complete the installation of 20,000 cabinets. Once put into operation, it will bring the company an annual net profit increase of 2-3 billion yuan. IDC and cloud computing business will be an important support for the company's future performance. Accelerate implementation of the “hard” to “soft” strategy. The company accelerates the transformation from a hardware product manufacturer to a software service provider by actively seeking external cooperation. Judging from the business layout during the reporting period, the company participated in Shengcan Technology and cooperated with the latter to establish a smart business district based on WeChat in Changsha. At the same time, the company is actively improving the Sichuan Shuxinyi O2O community finance platform jointly built with the Agricultural Credit Cooperative. Currently, the online platform layer has implemented the platform merchant management system and personalized activity development and official online application; in terms of offline promotion, pilot work has begun in 11 counties in 8 prefectures and cities in Sichuan Province, and the construction of 26 offline service centers has been completed. Performance forecast and valuation: The company's main business, financial electronic business, will grow steadily, and IDC and cloud computing businesses will guarantee the continued growth of the company's performance. It is estimated that the company's diluted EPS in 2016-2018 will be 0.21 yuan, 0.24 yuan, and 0.35 yuan respectively, and the corresponding PE will be 95 times, 82 times, and 58 times, respectively, maintaining the “increase in holdings” rating. Risk warning: The growth rate of financial electronic business fell short of expectations, and the construction progress of data center projects fell short of expectations.