Matters: The company released its financial report for the first quarter of 2016. During the reporting period, it achieved operating income of 54,739,375.38 yuan, a year-on-year increase of 21.14%; net profit attributable to shareholders of listed companies of 3,456,966.46 yuan, a year-on-year decrease of 53.52%; and deducting non-net profit of 1,393,781.20 yuan, turning a year-on-year loss into a profit. Comment: Performance has exceeded market expectations, and the transformation to mobile Internet is beginning to bear fruit. The company's operating income was 54.74 million yuan, up 21.14% year on year; net profit after deducting non-recurring profit and loss was 1.93 million yuan (compared with the same period last year - 547 million yuan), ending four consecutive quarters of operating losses, and an inflection point in performance became apparent. The increase in the company's profitability is mainly due to two points: 1. The steady growth of virtual operator business and initial results in traffic management; 2. The abolition of game development teams to reduce costs and expenses, and the gradual implementation of premium games from abroad. Videos and games are ready to go, consolidating the basic performance market. 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 game business is expected to impact revenue of 100 million yuan in 2016. With channel and business advantages, 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 become a new driving force for the company's revenue growth. 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: Traditional value-added is declining at an accelerated pace, new business falls short of expectations, and industrial fund investment risks. Profit forecasting, valuation and investment ratings: The company's business development inflection point is evident. The transformation strategy is clear and the implementation point is accurate. Mobile games and traffic management are expected to drive a reversal in performance. The establishment of a mobile internet industry fund is expected to further enhance development potential and accelerate the pace of transformation, maintaining the company's 2016-2018 EPS forecast of 0.21/0.34/0.43 yuan. The company has a small market capitalization and high performance flexibility. Future transformation and new business development are expected to be explosive, maintaining the “increase in holdings” rating.