Incidents Yuanwang Valley issued a foreign investment announcement on July 18, 2013. According to the announcement, the company will jointly invest 10 million yuan with Shenzhen Food Group (Yuanwang Valley's investment of 4.9 million yuan) to establish Shenzhen Yuanliang Information Technology Co., Ltd., which is mainly engaged in the application of FRID in the grain industry, agricultural product traceability, and big data trading platforms. We also take this opportunity to share our views on Distant View Valley. Comment Food traceability will be a heavyweight application scenario for RFID, and Yuanwang Valley's investment is expected to reap rich rewards: 1. Currently, RFID is mainly used in closed industrial environments such as railways, tobacco, alcohol, and libraries in China. With the exception of the railway industry, which is relatively large, the scale of other industry segments is not too large. This is also because the performance of RFID-related companies has not exploded as investors had previously expected. 2. Accumulate progress by leaps and bounds. In the future, each outbreak of RFID IoT industry applications will bring overall opportunities for the IoT industry. 3. Whether in terms of urgency or market size, food traceability is the most important RFID application segment in the future. Yuanwang Valley's joint venture with Shenzhen Food Group in this field is expected to reap rich returns within the next 2-3 years. Yuanwanggu is the purest IoT company: 1. Before the Internet of Things was hyped up in the capital market, Yuanwanggu had been in this business for over 10 years. Currently, the company is the second largest RFID company in China. 2. In terms of profit contribution, Yuanwanggu is still a company within the railway system. Therefore, the decline in railway investment last year had a major negative impact on Yuanwanggu's performance. We expect a restorative recovery in railway-related RFID investment in 2013, and the company's revenue from this business will show a moderate year-on-year increase. 3. If we look at businesses other than railway systems, Yuanwang Valley is growing very rapidly, whether in RFID-closed industry applications or open supermarket applications, and has a standard first-tier growth market trend. 4. Currently, the end customer of the company's open environment supermarket application is Walmart in the North American market. Domestic RFID industry standards are not uniform and no industrial camp has been formed, so there is still no volume. Jack Ma's intelligent logistics is expected to bring about the release of RFID in the domestic open chain: 1. The largest RFID application market is for logistics, supermarkets, etc. in an open environment, but currently there are no uniform rules for application, coding, and frequency in the domestic RFID market. Every time rules are mentioned, investors always expect the government to take the lead, but in reality this is a matter of industrial maturity and faction clusters. There is a need for large leading enterprises to step up and integrate the industry to a usable level. 2. Jack Ma established a “rookie” network and is committed to building an intelligent logistics network. The addition of industrial giants is expected to establish an ecological order in the industry and form a manufacturer camp community. In an open environment at that time, RFID emissions can be seriously anticipated. 3. The explosion of the logistics industry and the end of the demographic dividend have brought about a rapid rise in the remuneration of couriers. Improving logistics efficiency requires efforts to make logistics networks intelligent, which is the core reason why we are optimistic about the Valley from afar. Performance forecast: 1. The company's main EPS for 2013-2015 is expected to be 0.27 yuan, 0.43 yuan, and 0.65 yuan respectively. If the contribution of non-recurring factors such as investment income is taken into account, the 2013 EPS is expected to be about 0.40 yuan or more. 2. The current stock price is 9.99 yuan, which is equivalent to the valuation level of 23 x 2014 EPS, the main business, and is underestimated to a certain extent. Investment recommendations maintain the “increase in holdings” rating, and investors are advised to actively allocate. A target price of 13 yuan was given.