Key investment events: The company released its semi-annual report. In the first half of 2017, it achieved operating income of 330 million yuan, a slight decrease of 0.2% over the previous year, and net profit to mother of 72.75 million yuan, an increase of 35.9% over the previous year, after deducting net profit of 34.2 million yuan without return to mother, a decrease of 28.5% over the previous year. The revenue of traditional main businesses has narrowed, and the vocational education layout is slightly lower than expected. The company's main business is divided into two parts: communication services and vocational education. Communications services: In the first half of the year, the company's traditional main business achieved revenue of 190 million yuan, a decrease of 12.2% over the previous year. The main reason was that Internet Premium and technical service revenue was 27.5% lower due to reduced budgets of operators in various provinces. The big data business is developing well. Projects targeting the public security system have been deployed in 6 provinces, driving the big data business to grow by more than 300%. Vocational education: In the first half of the year, the vocational education business achieved revenue of 140 million yuan, an increase of 21.6% over the previous year. Affected by objective factors such as the school's deliberation process, the construction layout of Dingli College lags slightly behind the original plan, and cooperation between some institutions has entered the final stage of signing the contract. Currently, Dingli University has completed the independent enrollment of more than 2,000 students. The holding subsidiary Gano Matilda has completed the construction of three teaching bases in Beijing, Zhengzhou and Shenzhen, and has set up a total of 12 teaching practices. The company continues to promote the layout of Dingli College, and cooperation with some colleges has entered the final stage of signing. We believe that Dingli College will expand or meet expectations in the second half of the year. In addition, the company's transfer of shares in the participating subsidiary Yunchuang Data in the first half of the year brought in more than 30 million yuan in net income, which was the main reason for the rapid increase in the company's net profit to mother. At the same time, the company's accounts receivable increased during the reporting period, and a corresponding bad debt provision of 10.12 million yuan was calculated. One-chip smart integration boosts the company's profit level. During the reporting period, the company issued shares and raised supporting capital (purchasing assets to issue shares at a price of 12.26 yuan/share, raising supporting capital to issue shares at a price of 12.68 yuan/share) to acquire Yixin Intelligence was unconditionally approved by the Securities Regulatory Commission. The relevant targets completed the asset transfer on July 25 and became a wholly-owned subsidiary of the company. Yixin Intelligence is a leading domestic application solution for industrial robots, RFID electronic tags and IoT industries based on RFID technology. It has strong technical resource reserves, can effectively extend the reach of the company's communication business, expand the content of vocational education and training services, and form a strong synergy with the company's original business. The target company promised to achieve net profit of not less than 35 million yuan, 50 million, 60 million and 80 million yuan in 2016-2019, and to achieve net profit of 36.28 million yuan after deduction in 2016, exceeding performance promises. Restricted stock incentive plans are deeply tied to employees' interests and are expected to stimulate employees' enthusiasm. On June 13, the company announced the 2017 restricted stock incentive plan. It plans to award 21 million shares of the company to 107 people at 5.03 yuan/share per share, accounting for 4.21% of the total share capital; all but 5 company executives are the company's core key personnel. This strong and wide-ranging incentive plan will deeply bind key employees to the company's interests, and greatly stimulate the enthusiasm of middle management and core technical talents. Profit forecasting and investment advice. We expect the company's net profit to be 180 million yuan, 210 million yuan, and 300 million yuan respectively in 2017-2019. The corresponding EPS is 0.36 yuan, 0.42 yuan, and 0.60 yuan respectively. The company's development in the first half of the year was slightly lower than expected. The second half of the year was an important development period for the company's various businesses. We recommend continuing to pay attention to maintain the “gain” rating. Risk warning: the risk of a reduction in communications service business orders, the risk of Dingli University expanding or falling short of expectations.