Investment highlights Company news: The company released a performance forecast for the first half of 2016, and the net profit attributable to shareholders of listed companies is expected to rise 35.97% to 63.16% year on year to 40 million to 48 million yuan. The company believes that the main reasons for the increase in performance include: 1) Despite the decline in sales of USBKEY products, the domestic financial IC card market not fully launched, and the RCC business is exploring new operating models, the company still accurately grasped the opportunity of concentrated demand for financial terminal control chips, and achieved a year-on-year increase in sales revenue; 2 ) The company continues to strengthen internal management, improve the accuracy of R&D projects, balance the effects of non-immediate R&D in the medium to long term, and strive to improve R&D efficiency; 3) Strengthen supply chain management, reduce product costs, strictly manage various expenses, and intensively allocate resources. Comment: In terms of the product market, as the mobile payment industry continues to develop rapidly, especially after mobile terminal manufacturers represented by Apple, Samsung, and Huawei have launched their own mobile payment products as one of the market participants, traditional market participants include clearing institutions represented by UnionPay and Alipay, mobile network service providers represented by the three major operators, and many third-party payment institutions, forming a multi-dimensional pattern of the market. However, as an important step in the process of promoting mobile payments, the transformation of the hardware payment environment has become the first industry to be acquired. The company has seized the opportunity of rapid growth in demand for master control chips in various mobile payment terminals, which has achieved steady growth in a situation where demand for traditional products is relatively weak, and has become an important guarantee for the company's development. The company continues to promote the improvement of internal management efficiency, especially in terms of R&D expenses and project control. The company focuses on R&D investment in mobile payments and related software and hardware product systems, streamlines the number of the company's R&D projects, and balances medium- and short-term R&D effectiveness with refined management. We expect that the company's continuous control over costs will have a positive effect on the company's medium- to long-term development. The company continues to strengthen the efficiency of supply chain management. As an integrated circuit design company, the company's main costs come from the labor costs of engineering technology and related software testing products. It also requires amorphous foundry and packaging companies to form effective partnerships. We believe that the continuous improvement of the company's operating efficiency will become an important foundation for the company to maintain competitiveness in the face of different market environments. Investment advice: We forecast the company's earnings per share from 2016 to 2018 to be $0.20, $0.27, and $0.34, respectively. The return on net assets was 3.96%, 5.03%, and 6.02%, respectively. A recommendation to increase holdings was given. The six-month target price was 22.25 yuan, which is equivalent to the dynamic price-earnings ratios of 111.3, 83.0, and 65.0 times from 2016 to 2018. Risk warning: The pace of development and marketing of new products and solutions falls short of expectations; increased market competition affects the company's profitability.