Main points of investment:

The performance is growing rapidly. In 2015, the company's operating income was 1.23 billion yuan, an increase of 13.3% over the same period last year; the net profit returned to its mother was 108 million yuan, an increase of 37.7% over the same period last year; and basic earnings per share was 0.39 yuan, an increase of 39.3% over the same period last year. The reasons for the performance growth are as follows: 1) the revenue of the company's software and systems integration business was 1.217 billion yuan, an increase of 13.1% over the same period last year. 2) the asset impairment loss was 7.4324 million yuan, down 54.9% from the previous year. In 2015, the company promoted a comprehensive transformation of its business to cloud services, positioning itself as a smart government solution and service provider.

E-government business continues to grow at a high speed. From the perspective of industry: 1) E-government business has covered 28 provinces, with a provincial coverage rate of 90%. In 2015, the revenue of the business was 508 million yuan, an increase of 53.1% over the same period last year, and the gross profit margin was 44.5%, an increase of 6.8% over the same period last year. 2) Tobacco informatization has covered 29 provinces, with revenue of 188 million yuan, an increase of 0.8% over the same period last year, and a gross profit margin of 72.5% (8.4pct growth) 3) the revenue of other industries was 521 million yuan, down 6.7% from the same period last year. 4) the revenue of the leasing business was 12.8319 million yuan, an increase of 45.5% over the same period last year. The rapid development of e-government business has laid a solid foundation for the company to open up the government cloud market.

The layout of "government cloud + government affairs big data". The company has been deeply engaged in e-government for many years, and has stable customer resources in the fields of government affairs, education, police cloud, industry and commerce, civil affairs, food and drug supervision, etc. (for example, online examination and approval and electronic supervision cover customers in 28 provinces, nearly 100 prefectures and cities and more than 800 districts and counties). With multi-level intelligent urban planning and construction capabilities, with the overall solution of government cloud based on cloud computing and big data It covers Shandong, Jiangxi, Anhui and other provinces, cities, autonomous regions and counties. We believe that, combined with its own experience in industry solutions and the hardware and technology support of Tide Group, the company is expected to accelerate the promotion of public service integration platform and regional government data resource management platform project construction, adopt "platform + application" mode to provide wave open data platform and wave PaaS platform services, and dig deep into the value of open government cloud.

E-commerce is advancing steadily. The company released iMai3.0 in October 2015, which aims to provide e-commerce public service platform, integrated service platform and e-commerce transaction platform for various industries and enterprise customers, with many characteristics such as open ecology, mobile e-commerce and traditional e-commerce layout. Wave e-commerce platform integrates cloud computing, big data, mobile Internet and other technologies, and jointly with third-party systems to provide warehousing and logistics services, food traceability, supply chain finance and other characteristic applications, has been promoted in supply and marketing cooperatives and rural e-commerce, cross-border e-commerce, foreign trade integrated services and other fields. Typical projects include Shandong supply and Marketing Cooperative e-commerce platform, Tianjin North (International) import cross-border e-commerce platform, Qin Gong International M2B cross-border e-commerce platform and so on.

Profit forecast and investment advice. We believe that the company has accumulated a wealth of solutions in local e-government and industry e-government, and the market expansion ability of government cloud is more outstanding. We estimate that the company's EPS for 2016-2018 will be 0.57 soybean 0.81 yuan 1.08 yuan, with a six-month target price of 45.70 yuan per share, corresponding to 80 times the 2016 PE, maintaining a "buy" rating.

Risk hint. Government cloud business and e-commerce business to promote lower-than-expected risk, systemic risk.