Incident: On the evening of July 7, the company released the 2016 semi-annual performance forecast. The company's net profit for the first half of 2016 is expected to be 40 to 48 million yuan, an increase of 35.97% to 63.16% year-on-year. China Investment Electronics's opinion: The company is missing a bid in the field of A-share information security IC design, and has more than 16 years of technology and market accumulation. Currently, the company is focusing on building a complete mobile terminal information security ecosystem, creating general solutions for financial and personal information security, and providing users with various products and solutions such as USBKEY master control chips, smart card chips, RCC near-field payment, trusted computing chips, and IDSS multi-function platforms. With the rapid development of mobile payments and IoT applications, hardware information security solutions are expected to gain market recognition due to their high security and high versatility advantages. At the same time, the country's demand for autonomous and controllable security hardware continues to rise, which will also speed up the localization process of financial IC cards and catalyze the RCC near-term payment market. The company's information security field layout is comprehensive, traditional business advantages are consolidated, and emerging markets are expected to be fully launched, ushering in a new stage of development. Key investment points: financial IC card+industry card collaborative development, two-wheel drive. The country's demand for autonomy and control continues to rise, and it is expected that domestic financial IC card replacement will take substantial steps this year. The company is a mainstream financial IC card manufacturer. It has a first-mover advantage and good reputation in the industry, and is the main beneficiary of this wave of substitution. At present, the company's financial IC card chips have been sent to mainstream commercial banks in China, leading the layout. At the same time, the company seizes opportunities for the development of social security cards and residents' health cards, gives full play to the technical advantages of smart cards, and continues to explore related markets. Financial terminal security chips and modules continue to grow. The company actively expands the financial payment terminal market, continuously improves product performance, seizes the opportunity of a concentrated explosion in demand for financial terminal security chips, and sales revenue continues to grow. The near-field payment ecosystem is developing rapidly, and national standards are expected to be implemented. As Apple Pay and Samsung Pay entered the Chinese market in the first half of the year, the near-market payment ecosystem improved rapidly, and user payment habits began to take shape. The RCC entry payment solution is autonomous and has the advantage of being easy to use, and there is no need to change phones. Currently, the RCC payment national standard is being publicized. Once the standard is implemented, the company's related business will explode. The trusted computing industry is leading, and the industrial chain layout is comprehensive. With the development of industries such as the Internet of Things, the demand for hardware terminal security markets has increased rapidly. Trusted computing is expected to open up the IoT terminal information security market, and there is huge room for future market growth. The company is a leading domestic trusted computing manufacturer and is expected to benefit deeply. Given the “Highly Recommended” rating, the net profit for 16-18 is expected to be 149/2.45/371 million yuan, and the corresponding EPS is 0.26/0.44/0.66 yuan, respectively, up 73%/65%/51% year-on-year. It gives 50 times PE in 17 years, and the initial target price is 22 yuan, which has long-term investment value. Risk warning: There is a risk that global macroeconomic downturn, the promotion of localization in the field of information security falls short of expectations, demand for security and payment chips in the financial and other industries falls short of expectations, and that epitaxial development falls short of expectations.