1. Expectations for private network communication began in 2011, and private network communication (digital clusters) finally started in 2014. Market expectations for private network communication (digital clusters) began in 2011, but due to various reasons, there were many good things, and the large-scale launch was delayed until 2014. In March, the order was issued by Liaoning, and in April, Chongqing began bidding. We expect that a large number of orders will be released later, and the good days for private network communication have finally arrived. Similar to the video surveillance industry in 2009, economic growth and demand for stability spawned explosive growth in private network communication 2. We will compare the construction of a private network in 2014 with the video surveillance industry in 2009. 1) The macro background of the two is the same: the economy has begun to decline, and investment in emerging industries is needed to drive GDP. At the same time, during the economic downturn, social instability factors have increased, and demand for stability has increased dramatically. 2) At the beginning of construction, the market's expectations for future investment were insufficient, causing many investors to get off the bus halfway. 3) It is easy to compare it to a “smart city”. There are doubts about the industry's profit margin. “Smart city” orders are large, but most of the capital is invested in real estate projects. Electronic information products only account for a very small part, and at the same time, the payback period is long. This is essentially different from private network communication. It should be said that the vast majority of private network investment is invested in network construction and terminal procurement. 3. The private network industry has at least 100 billion dollars of market capitalization. Currently, the market value of the industry is over 10 billion dollars. Considering how much is the stable market space for private network communication, we use two methods to make a conservative estimate. Indirect method: Motorola solutions have earned about 6 billion US dollars in the past three years. The main orders come from the US government. Regardless of the population differences between China and the US, the number of cities, it is simply assumed that the construction volume in China is the same as the US, and the price is half that of the US. Well, the stable state of China's private network is conservatively estimated at 15 to 20 billion. Direct law: The main users of the private network are public security, which accounts for about 60% of the Chinese market. Others include subways, forestry, ports, wharves, and the government. As of the end of 2013, the number of police on staff in China was 2.8 million, growing at a rate of 10%-15% every year, and a large number of co-police officers. The total number of police personnel in the police force was about 10 million (according to statistics from recent years, the number of US police personnel fluctuated around 1 million). According to terminal updates every 2 years, 40% of personnel, the terminal price was around 3,000 yuan, and the market size was 6 billion yuan. Coupled with other users and network maintenance updates, the space of 10-15 billion dollars is a very conservative estimate. Furthermore, based on frequency bands, we estimate that it will take at least 30 to 50 billion dollars to complete the initial construction of a private network. The market's claim that the construction of a private network can be completed with 10 billion dollars is untrue. Due to the 2008 Olympics, Beijing spent 800 million dollars to build a private network within the 5th Ring Road (constructed by Aerospace Europe). Even if our technology is advanced and the cost is low, and it only costs 25% to complete the construction, it would cost about 200 million yuan. That is, the area within the 5th Ring Road of Beijing is still far from covering the whole country. Therefore, the construction and maintenance of private networks requires a large amount of investment. Once government agencies get used to high-tech products, it is impossible to return to the past, and these investments will become rigid expenses. 4. Furthermore, there is still huge room in the global market. As long as Chinese companies have domestic competitiveness in a certain field of information, they also have global competitiveness. Numerous facts have proven this. The market value of Motorola's solutions is 100 billion US dollars, and the market value of the domestic industry is more than 10 billion dollars (valuation of Hytera and Oriental Communications Private Network). We think that although there are more than 20 manufacturers doing business in this area, those that have the chance to grow are Oriental Communications and Hynengda. All others will be eliminated in subsequent competition, just like Haikang and Dahua in the security industry. Although there are many companies involved, it is basically a regional company, making it difficult to compete at the national level. 5. Oriental Communications is one of the two oligarchs in private network communication, and also one of the two oligarchs in the field of electronic finance. Another field of Oriental Communications is e-finance, including ATMs (including all-in-one deposit/withdrawal machines) and VTM, and radio and television communication, forming a duopoly situation. Due to the mastery of core technology and information security considerations, the domestic ATM competition pattern will change dramatically. Currently, the domestic ATM market space is 8 to 10 billion dollars a year (the central bank announces the number of ATMs every quarter; interested readers can make their own estimates). Overseas and domestic manufacturers are equally divided. With the gradual withdrawal of overseas manufacturers, the share of domestic manufacturers is expected to double within a few years. Oriental Communications's market share of 10% (of which 6% for independent products and 4% for agency products) is expected to expand to 30% in recent years. VTM is an expression of electronic self-service banking. In the long run, it will surpass the market space of ATMs. Currently, the top two in terms of overall strength are Radio and Television Express and Oriental Communications, which are expected to gain a large share after VTM is released. 6. Oriental Communications looks like PE is very high, but considering its long-term high growth, the price is still at the foot of the mountain. You can't even talk about Oriental Communications at the mountainside. Of these, the total share capital of Oriental Communications is 1,256 billion, of which 300 million B shares, the market value of A shares is about 10 billion, and the corporate shares are 600 million. In fact, the company's A-share circulation is over 300 million, and the market value in circulation is less than 4 billion. Also, considering the market value of e-finance rivals, it is reasonable to give the current state of e-finance industry a market value of 5 billion dollars. In other words, the A-share market value of private network communication is 5 billion dollars. If we take into account the 7-8 times growth space of e-finance and the 100 billion space for private network communication, we are facing an opportunity of a 5-10 times bull stock market. We forecast that the company's 2014-2016 EPS will be 0.30 yuan, 0.56 yuan, and 0.87 yuan respectively. Considering the company's future market space and low market position, we gave a price-earnings ratio of 30 times in 2015, corresponding to a six-month target price of 16.8 yuan, maintaining the “buy” rating. 7. Risk warning: Tetra's profit fell short of expectations, PDT market launch fell short of expectations, ATM market fell short of expectations