The company announced its 2015 semi-annual report: the company achieved total assets of 1.72 billion yuan in the first half of the year, an increase of 8.94% over the beginning of the year; net assets of 1.31 billion yuan, an increase of 5.06% over the beginning of the year; operating income of 760 million yuan, an increase of 26.06% over the same period last year; and realized net profit attributable to shareholders of listed companies of 124 million yuan, an increase of 23.20% over the same period last year. Key Opinions 1. Performance growth is in line with expectations. In the first half of the year, the company achieved total assets of 1.72 billion yuan, an increase of 8.94% over the beginning of the year; net assets of 1.31 billion yuan, an increase of 5.06% over the beginning of the year; operating income of 760 million yuan, an increase of 26.06% over the same period last year; and realized net profit attributable to shareholders of listed companies of 124 million yuan, an increase of 23.20% over the same period last year. On the one hand, this benefits from the continuous supply of financial IC card demand in the industry, and on the other hand, the company's market share is also increasing. 2. Business highlights in various fields are expected to explode. The company is committed to providing high-end intelligent products and solutions for various industries such as finance, communications, taxation, transportation, insurance, security, municipal construction, etc. The leading products and businesses include financial IC cards, communication IC cards, mobile payment products, Internet payment terminals, magnetic stripe cards, cryptographic cards, tickets, Internet of Things, platform systems, and information security service businesses and solutions. Collaborative development in various fields and highlights are frequent. In the financial sector, the number of corporate financial IC cards and financial social security cards issued continued to grow during the reporting period, continuing to be in the first tier of the market; residents' health cards were successfully shortlisted in Jiangsu, Qinghai, Guizhou, Hubei and other provinces and cities, and began issuing cards in batches; the innovative product Bluetooth non-connected financial IC card is already ready for commercial use and is being actively promoted. Looking ahead to 2015, we believe that the overall number of financial IC cards issued will maintain a 20% increase. This is due, on the one hand, to a natural increase of about 10% of bank cards each year, and on the other hand, to an increase in the penetration rate of financial IC cards. According to statistics, as of the first quarter of 2015, the total number of financial IC cards issued nationwide was 1,446 billion, making it the bank card organization with the largest number of chip cards in the world. In the first quarter of 2015 alone, UnionPay added 220 million financial IC cards. Driven by the “Internet +” trend, financial IC cards have entered a new era of “payment+consumption+life.” In the future, financial IC cards will open up all channels of mobile phones, consumption, and life, and complete the contactless payment layout including supermarkets, shopping malls, restaurants, entertainment, parking lots, public transportation systems, farmers' markets, and smart parks. At the same time, benefiting from the commercial use of domestically produced chips, foreign chip prices are bound to drop, and the gross margin of the product is expected to stabilize. We expect the corporate finance sector business to maintain growth of more than 20% in 2015. Mobile payment cards The mobile payment industry is expected to explode in 2015. The company's mobile payment NFC-SWP card was also shortlisted by the three major operators of Mobile, Unicom, and Telecom. It won the bid for mobile and telecom collection with an excellent price combination, and has already begun to supply cards in batches. Mobile payment 4GNFC products have already been commercialized on a large scale. Based on the company's many years of experience in mobile payments, it has completed air loading plans for bus applications in nearly 100 prefectures and cities across the country and payment applications in banks and other industries across the country, achieving commercial promotion; the company has taken the lead in passing the mobile finance product certification of the People's Bank of China and achieved commercial use in the People's Bank of China's mobile finance pilot cities. Currently, China's three major mobile operators are still focusing on actively deploying and promoting NFC-based mobile payment services and 4G broadband services; third-party payment institutions, including Alipay, Tencent, and Baidu, are vigorously developing mobile payment services from online to offline, creating a closed O2O loop; and commercial banks are making collective efforts in cloud payments and wearable payment devices. The future may set off a peak in the issuance of SWP cards. As the only listed company to be shortlisted in the SWP card procurement business of the three major operators at the same time, the company is expected to achieve a rapid increase in revenue. Internet payment terminals With the spread of O2O e-commerce, Internet POS upgrades will become an irreversible trend. The company's IC card internet payment terminal products were shortlisted by CCB and the Agricultural Bank, and are already being supplied in batches. The company signed a cooperation agreement with UnionPay for Bluetooth cards and wearable payment products, and a cooperation agreement for second-generation Internet terminal products. The company's mPOS products passed the product safety assessment by the BCTC testing center, and the products were commercially listed. The Bluetooth second-generation KEY product has passed the agricultural bank's tender test, and the new second-generation OTP products have been commercialized in batches. In May 2015, the company strategically held Yikai with 153 million yuan and made every effort to promote the development and industrialization of overall mPOS solutions. Performance is expected to break through in 2015. By building a mobile payment network integrating various online and offline payment methods and integrating other value-added services, the company provides an overall “Internet +” solution for micro, small and medium-sized merchants, and creates a service operation platform for micro, small and medium-sized merchants. It is expected to achieve 1 million active users in the next three years, which can provide a user base and big data resources for subsequent commercial services and financial services, and is expected to form an “Internet+finance” and “Internet+business” operation service model, leading to further increases in gross margin and revenue. 3. Capital is driving the transformation of the company, and expectations for extension are strong. By investing in Nanjing Shengyu Investment and Hengyu Investment, the company will in the future help the company expand its business and select targets in the field of mobile payment security, and use capital platforms to quickly lay out related industries. In the future, the company will make full use of its resource advantages, strengthen the construction of end-to-end overall solutions, and focus on achieving integration and innovation in the fields of mobile Internet card payment, Internet identification security, cloud payment and cloud billing, and biometrics. Pay close attention to innovative business development trends such as banks, virtual operators, third-party payments, city cards, and Internet companies, maintain the timely layout of cooperative resource enterprises in the industrial chain, and accelerate the company's strategic upgrading. In summary, we believe that the company's traditional business can maintain steady growth in the future, and the transformation business is expected to open up new growth space. We forecast EPS for 2015 and 2016 to be 0.56 and 0.73, respectively, with corresponding valuations of 29 times and 22 times, maintaining the “recommended” rating. Risk Reminder 1. Financial IC card development falls short of expectations. 2. The mobile payment business is developing slowly.