Matters: On the evening of July 28, the company released its performance report for the first half of 2016. The reporting period achieved operating income of 139,605,902.40 yuan, an increase of 46.28% over the previous year; net profit attributable to shareholders of listed companies was 22,591,871.08 yuan, and a loss of 2,843,794.75 yuan for the same period last year. Our comments on this are as follows. Comment: Revenue slightly exceeded market expectations, and the profit situation improved markedly. The company's revenue increased by 46.28% year-on-year, mainly due to the increase in new business contributions, mainly from two sectors: 1. The virtual operator business grew steadily, and traffic management began to bear fruit; 2. The Nanjing Beiwei International Center was put into commercial use, and the occupancy rate increased rapidly. Net profit increased 894.43% year on year to turn a loss into a profit. On the one hand, incremental revenue brought profit contributions, and on the other hand, business optimization and personnel adjustments were completed in the second half of 2015, and related operating costs and expenses were drastically reduced. Accelerate the introduction of premium games from abroad. The company's game and video businesses have established differentiated competitive strategies and strong monetization capabilities. Profits are expected to rise steadily from 2016. Mobile video deepens cooperation with CCTV International and China Mobile, benefiting from the popularity of 4G and the double promotion of live game broadcasts. Mobile games focus on international IPs as boutique agents, and have already obtained distribution rights for various star games such as EA, King, and Rovio. The number of agency games is expected to continue to increase. Traffic management is expected to become a new revenue growth pole. The company has made a strong entry into the mobile Internet access business, and is the only A-share listed company to fully cover WiFi and 3G/4G traffic operations. The total length of WiFi resale time exceeds 10 million hours, accounting for the largest share of third parties. 3G/4G traffic management has a high starting point, and the layout has a first-mover advantage, focusing on expanding Internet channels and customers in the financial industry. It is expected that traffic management will continue to bring incremental revenue contributions. Set up a mobile Internet industry fund to expand and expand the layout. The company recently signed agreements with Ping An Finance, Wonderful World, and Ping An Wisdom to jointly establish a mobile Internet industry investment merger and acquisition fund. The estimated total fund size is RMB 500 million, of which the company has pledged 150 million yuan. The investment direction of the fund is core communication equipment and application solutions, intelligent hardware, and mobile Internet services. This time, the company participated in the establishment of an industrial fund, and the transformation of mobile Internet is expected to accelerate. The investment direction of the fund covers communication solutions, intelligent hardware, and mobile Internet services, such as video lottery cloud platforms, mobile games, etc., which is expected to form collaboration with the company's business, which is conducive to integrating industrial resources and channel capabilities and promoting the rapid development of existing business. Furthermore, the company is expanding into the field of intelligent hardware and communication solutions through industrial funds, and is expected to participate in the construction of a mobile Internet ecosystem integrating software and hardware. Risk factors: New business growth falls short of expectations, industrial fund investment risk. Maintaining the “increase in holdings” rating: The company's business development is at an inflection point. The transformation strategy is clear and the implementation point is accurate. Traffic management and industrial bases are expected to drive a reversal in performance. The establishment of a mobile internet industry fund is expected to further enhance development momentum and accelerate the pace of transformation, maintaining the company's 2016-2018 EPS forecast of 0.21/0.34/0.43 yuan. The current price corresponding to PE is 89/55/44 times, respectively. The company's transformation is progressing steadily, its market capitalization is small and flexible, and it has maintained an “increase in holdings” rating.