Main points of investment:

The company issued a forecast of 2016 half-year results on the evening of July 14, 2016. The net profit range from January to June 2016 was 13.0768 million yuan to 17.4358 million yuan, compared with 21.7947 million yuan in the same period last year, down-40% to-20% from the same period last year.

The growth rate of old products is declining, and revenue is basically flat. On the one hand, in the first half of the year, the company's original main product electronic payment password system sales volume, sales revenue declined compared with the same period last year. From the perspective of the industry, the market competition of electronic payment password system continues to intensify, and with the increase of market penetration, the market demand of the original products has declined, resulting in a decline in the growth rate of product sales compared with the same period last year. But on the other hand, the company actively promotes the market promotion of the new product "public mobile payment". The new product contributes part of the revenue in the first half of the year, and the company's main business income in the first half of the year is basically the same as the same period last year.

The increase in investment in new product research and development and promotion has resulted in a significant increase in costs compared with the same period last year. As the first half of 2016 is a critical period for the company's business transformation and market expansion, the company's R & D investment and marketing investment increased significantly compared with the same period last year, so the increase in expenses during the period led to a certain decline in the company's net profit in the first half of the year.

Look forward to the contribution of new products in the second half of the year to achieve performance reversal, medium-and long-term optimistic. The company's R & D and marketing investment and follow-up expenditure in the first half of the year are expected to bring continuous growth in new product revenue in the second half of the year and the year after next. And its global original paper pattern recognition products, is expected to have 50-10 billion market space; the company began to build the Bank-Enterprise platform, from "selling products" to "building platform + providing services", improving customer stickiness and accumulating data assets.

Maintain the "buy" rating and maintain the profit forecast. The profit from 2016 to 2018 is expected to be 140 million, 231 million, 299 million. EPS is 0.42, 0.69, 0.89, respectively. The corresponding price-to-earnings ratio of 14-day stock price is 59.71, 36.45, 28.18.