Report Summary: The company specializes in R&D, production, sales and service of information security products with identity authentication as the core. The main products include ePASS series US B Key, OTP series dynamic token, ROCKEY series software encryption lock, Flying Smart Card and writer. The products are mainly used in banks, other enterprises and institutions, e-commerce, e-government, etc., and the market share of the main products is in the top three in the industry. The company has a broad customer base, and the bank customer coverage ranking is high; it has strong R&D capabilities and is ranked high in the number of invention patents; its products have obtained many certifications, and the product line is rich. From 2011 to 2013, the company's revenue increased by 57.95%, 78.18%, and 39.79% respectively, and net profit increased by 52.38%, 75.43%, and 94.67% respectively, maintaining a relatively rapid growth rate. The company's profits mainly come from US B Key, OTP dynamic tokens, and cryptographic locks. From 2011 to 2013, the total gross profit share of these three types of products was 95.98%, 99.01%, and 97.83%, respectively. Among them, US B Key products contributed the most to performance. The company has raised a net capital of 6184.9 million yuan, and will invest in seven projects in order of priority, including technology upgrading, new product development and industrialization projects for US B Key security products; R&D and industrialization projects for dynamic token authentication systems; and R&D and industrialization of general Java card platforms and smart cards. We expect the company's net profit to increase by 37% and 27% respectively from 2014 to 2015. With the total share capital diluted with earnings of 2.89 yuan and 3.68 yuan per share after issuance, there are no completely comparable companies. We believe that the reasonable valuation range for the company is 53-62 yuan, which corresponds to 18-22 times the 2014 price-earnings ratio. Risk warning: Risk of high dependency on major customers; major products are at risk of technological upgrading.