Event: The company released its report for the first quarter of 2016, and profits grew rapidly. We achieved revenue of 157 million yuan in the first quarter of 2016, an increase of 29.64% year over year. Net profit attributable to the parent company was 26.13 million yuan, an increase of 156.71% over the previous year. China Investment Electronics's view: The company is a leader in the domestic information technology security IC design industry. It has an architectural heritage of “communication interface+encryption algorithm+calculation module” to provide general solutions for financial information security. The company's main business logic is clear and developing rapidly. USBKEY lays out the mobile terminal security market; industry cards and financial IC cards are two-wheel drive, and the financial terminal security chip business has achieved a breakthrough; it is expected to lead to rapid growth in the company's related business. At the same time, RCC mobile payment is expected to combine the Internet and upstream and downstream of the industrial chain to open up a new business model and open up a new market space. We believe that the company's main business will achieve rapid growth, while RCC's new business model will inject sufficient flexibility into the company and give the company a “Highly Recommended” rating. Key investment points: The USBKEY market is becoming more mature, and mobile terminal security requirements bring new opportunities to the industry. At present, the domestic USBKEY market is becoming more mature, and product competition is fierce. While continuing to use the industry's leading technology and resource advantages to consolidate its market position, the company is actively developing new products for mobile terminals. The USBKEY master control chip for mobile networks has entered the marketing and customer introduction stage and is being tested in some commercial banks. In 2015, the number of mobile phone users in China exceeded 1.3 billion, and there is a huge space for mobile terminal users. We believe that with the further penetration of smart terminals and the continuous shift of PC users to mobile devices, demand in the mobile terminal security industry will rapidly increase, opening up a market space of 10 billion dollars, bringing new opportunities for industry investment. The company has USBKEY's deep technology accumulation and industry resource advantages. At the same time, it lays out USBKEY security master control chips for mobile terminals early, and has comparative advantages in the industry. Once the mobile terminal security market opens, the company will usher in product structure optimization and rapid performance growth. Localization of financial IC card+collaborative development of industry cards, two-wheel drive. The financial IC card industry is growing rapidly, and the annual market size is expected to exceed 6 billion in the next five years. Localization of financial IC card chips has become an industry trend. Domestic replacement is imminent, and there is huge room for replacement. The company continues to improve financial IC card chip research and development capabilities, strengthen upstream and downstream partnerships in the industrial chain and market introduction work. Financial IC card chips achieved year-on-year growth this quarter. At the same time, the company seized the development opportunities of social security cards and residents' health cards to consolidate its position in the industry card market, and the sales revenue of residents' health cards increased year-on-year. The company's chip card business is two-wheel drive, and financial IC card+industry card is developing collaboratively. The company's industry card market advantage will strengthen the company's market competitiveness and industry voice in the field of financial IC cards. At present, samples of corporate financial IC cards have been sent to mainstream domestic commercial banks, and industry competition is in an advantageous position. With the outbreak of domestic replacement of financial IC card chips, the company's chip card business is expected to grow rapidly. Breakthroughs have been made in financial terminal security chips and modules. The company actively expands the financial payment terminal market and continues to improve product performance. It has made major breakthroughs in the shipment of financial terminal security chips and modules, which is expected to become a new growth point for the company's business. RCC mobile payments are expected to open up a new business model. RCC mobile payments are autonomous and controllable. In the long run, they meet the development requirements of the national information security strategy, and have room for development and flexibility. The company continues to strengthen the optimization and non-delivery of RCC products and actively promote the implementation of relevant standards. At the same time, the company continues to explore the RCC mobile payment business model, combine Internet applications, and strengthen industrial chain cooperation. We believe that RCC's business is autonomous, controllable and technologically advanced, which is an important part of the company's development strategy; in the future, we hope to combine other applications to create a fully functional RCC mobile lifestyle platform and business ecosystem, and launch a new business model. It gave a “Highly Recommended” rating. The first target price was 22 yuan, so it is recommended to buy. Assuming breakthroughs in mobile payments and security chips are driven by autonomy and control, the company's performance will grow rapidly in the next 3 to 5 years, and has a high net profit margin, and can be valued as a high-growth stock. Net profit for 16-18 is expected to be 1.49/2.46/372 million yuan, EPS 0.26/0.44/0.66 yuan, with a year-on-year growth rate of 73%/65%/51%. It is 50 times PE in 17 years, and the first target price is 22 yuan. It has long-term investment value and is rated as “Highly Recommended”. Risk warning: the global macroeconomic downturn, the promotion of localization in the field of information security falls short of expectations; the risk that demand for security and payment chips in the financial and other industries falls short of expectations, and that epitaxial development falls short of expectations.