Incident: Hua Pengfei announced the 2016 mid-year report. In the first half of the year, the company achieved operating income of 281 million yuan (-16.61%), net profit of 34.55 million yuan (+127.73%), net profit of 34.55 million yuan (+127.73%), net profit of 33.16 million yuan (+163.42%), basic EPS of 0.12 yuan (+33.33%), and a weighted ROE of 1.98% (-1.52 pct). Comment: 1. The acquisition of Bohan Weiye led to a rapid increase in net profit. In line with expectations, the company achieved operating income of 281 million yuan (-16.61%) in the first half of the year; the decline in revenue was mainly due to the sale of 85% shares in Demaco Intelligent Machinery in November 2015 and the decline in revenue from Huafei's supply chain. Demaco's intelligent machinery was no longer listed in the first half of the year, but achieved operating income of 95.7 million yuan and net profit of 3.7 million yuan in the same period last year. Furthermore, Huafei's supply chain had no operating income in the first half of the year and lost 90,000 yuan; in the same period last year, it achieved operating income of 33.91 million yuan and net profit of 410,000 yuan. The two major factors combined to reduce the company's revenue by about 130 million yuan. During the reporting period, the company achieved net profit of 34.554 million yuan, or 127.73% over the same period last year, mainly by adding a consolidated wholly-owned subsidiary, Bohan Weiye (Beijing) Technology Co., Ltd. In the first half of 2016, Bohan Weiye achieved operating income of 83.51 million yuan and net profit of 32.57 million yuan, accounting for 92.3% of the company's net profit for the first half of the year. Due to the seasonal characteristics of Bohan Weiye's business, revenue in the fourth quarter was relatively high. In the first half of the year, it only fulfilled 24.13% of the 2016 performance promise of 135 million yuan. 2. Refined management coping with the decline in traditional logistics business. Judging from the revenue and gross profit composition, the company's product sales and supply chain business shrank markedly in the first half of the year. Traditional integrated logistics business and intelligent mobile services (Bohan Weiye) contributed 84.3% of revenue to 94.9%. However, with the downturn in the downstream electronic information industry, the gross margin of the company's integrated logistics business continued to decline. In the first half of the year, Bohan Weiye's intelligent mobile service contributed more than 90% of net profit, and the company's traditional business was close to marginal profit. In order to cope with fierce industry competition, the company has accelerated the pace of informatization construction in the logistics sector, continuously improved the level of refined management, and improved operational efficiency. The company is actively expanding the market, especially in the solar photovoltaic industry, wind power industry and other industries, and actively participated in the bidding of high-quality customers such as China Telecom and China Mobile to achieve steady growth in the overall integrated logistics service business in 2016. 3. Diversified market companies that are steadily expanding mobile IoT business build ubiquitous networks through independently innovated IoT platforms, industry terminals, and mobile computing technology models to provide customers with comprehensive IoT operation services, and strongly guarantee the “full network” mobile field operation needs of customers. In the future, the company will also rely on the rich experience accumulated in large-scale mobile terminal equipment operation services to achieve: A) continuous innovation in equipment operation, application services, organization and implementation, business process training, etc. B) Expand new business through the differentiated operation model of “finance+hardware+platform+service”, increase logistics and FMCG mobile informatization operations and deployment C) Gradually increase the strategic deployment of smart medical care on the basis of continuing to promote mobile medical projects D) Relying on operating experience in the logistics field, independent platform development, and application process reengineering capabilities, etc., to try to expand mobile objects in multiple industries Connect applications, and actively expand various types of project outsourcing, service outsourcing and other services. 4. Investment strategy: The traditional electronic information logistics industry is declining, and the company's acquisition of Bohan Weiye enters the mobile IoT business, and performance has improved dramatically. In the future, the company will focus on the “big logistics” strategy to expand the big logistics industry informatization, and performance is expected to continue to grow rapidly. We expect the company's EPS for 16/17/18 to be 0.47/0.53/0.59 yuan, corresponding to the current stock price PE of 65.4/57.4/52.0 X, maintaining the “Prudent Recommendation - A” rating. Risk warning: The economy continues to decline, and mergers and acquisitions fall short of expectations