I. Overview of events

Ovi Communications recently received a bid-winning notice from a bureau of the equipment Development Department, confirming that the company is the bid-winning unit of "a certain information system video and audio subsystem". The tender amount of the company is 50.89 million yuan.

1. 2. Analysis and judgment

With the scarcity of high-tech military industrial targets in Northeast China, military business has gradually opened up ① to sign a strategic cooperation framework agreement with military academies to cultivate military projects. In June 2015, Ovid Communications signed a "Strategic Cooperation Framework Agreement" with a military academy, and the two sides reached an intention to cooperate in scientific research projects, product production and promotion, and scientific research backbone training. In July 2015, the company won the bid for a battlefield information training system with an amount of 3.295 million yuan and won the military order for the first time.

The northeast region of ② is scarce for high-tech communications and military industry. As early as 2012, the company set up the military products Division, which is committed to providing system-level solutions for all branches of the army, as well as armed police, public security, fire control, transportation and other departments. At present, it has obtained the corresponding qualification for the production of military products, and has been included in the list of equipment production units of the Chinese people's Liberation Army, which can independently undertake the development and production of military products, and the company is based on the northeast war storage units. gradually open the military information market.

③ won another military order, an important breakthrough in the field of national defense information. Ovi Communications announced that recently, a bureau of the Ministry of equipment Development won the bid for the project "Video and Audio Subsystem of a certain Information system", with a bid amount of 50.89 million, accounting for 13.06% of the audited business income in 2015. We expect that the winning bid will have a positive impact on the operating results in 2016 and lay a foundation for the company to expand military customers and expand other military businesses.

National defense information windward, military communications business is expected to become a new engine ① in the next 10 years, the total scale of national defense information is expected to exceed trillion space. The outline of the 13th five-year Plan for military construction puts forward that great progress should be made in information construction and the construction of a modern military force system with Chinese characteristics that can win information wars and effectively perform missions and tasks. According to this goal, the China Industrial Information Network estimates that defense information expenditure in 2015 is about 87.8 billion yuan, an increase of 17 percent over the same period last year. China's defense information expenditure will grow to 251.3 billion yuan in 2025, with an annual compound growth rate of 11.09 percent and accounting for 40 percent of equipment costs. Assuming that defense information expenditure is based on 87.8 billion yuan and grows at a compound rate of 11.09 percent, the total scale of information expenditure will exceed 1.6 trillion yuan in the next decade.

② there is a big gap between the military communication system of our country and the developed countries, and the construction has entered the fast lane. According to the data of China Industrial Development Research Network, developed countries spend about 5% of national defense expenditure on military communication system construction, while China's military industrial communication system construction accounts for less than 2%. With the advance of national defense information construction, the construction of military industrial communication system in China will be accelerated. The China Industrial Information Network predicts that the scale of China's military communications and information market will reach 100 billion in 2018.

After years of cultivation, ③ 's military communications business has made a breakthrough and turned into the performance of the company. Benefiting from the promotion of national defense information construction, the company's military communications business is expected to become a new engine of performance growth.

The application for the acquisition of snow carp has been accepted and the transformation of the mobile Internet may be on the ground. since March last year, the company has been planning to acquire snow carp and cut into the mobile Internet platform business. The CSRC accepted it in June this year and has now reached the stage of feedback and reply.

① Snow Carp is not only a developer of functional mobile games, but also a channel access platform operator. Snow carp's main business is the research and development and operation of mobile games, as well as the operation of mobile game access platform. Since 2009, Snow Carp realized the strategic value of the channel access platform and changed the company's strategy to "platform-based and content-based". Since July 2014, snow carp has extended from the functional mobile game channel access platform to the smartphone game channel access platform. The company launches the easy-to-connect platform business to provide free online channel access services for smartphone game developers, and then cashes the traffic around the developer and channel business traffic introduced by the free service by providing fee-based payment services.

As of December 31, 2015, there were 2665 mobile game developers and 264 online channels.

② easy-to-connect platform: the core of expanding mobile Internet services. In the process of serving mobile game content providers, the easy-to-connect platform has accumulated a large amount of game player data, laying a solid foundation for the expansion of game distribution, traffic exchange, precision advertising, data analysis and other services.

Third, profit forecast and investment suggestions

Suppose: 1, the company successfully acquires 100% equity of snow carp in accordance with the way of issuing shares and paying cash, and pays the transaction consideration of 1.86 billion yuan.

2. the transaction consideration shall be paid by issuing 79.4872 million common shares and paying 744 million yuan in cash, and the issuing price is 14.04 yuan per share.

We predict that under the above assumptions, the company's EPS in 2016-2018 is expected to be 0.35,0.39 and 0.53 yuan respectively, corresponding to the current share price valuation of 40,36 and 26 times, respectively, giving a cautiously recommended rating.