I. Overview of events

Recently, the company released its semi-annual report for 2017: revenue in the first half of 2017 was 148 million yuan, an increase of 25.74 percent over the same period last year, and its net profit was 8.7219 million yuan, an increase of 8.81 percent over the same period last year. The net profit after deducting non-return was 8.3618 million yuan, an increase of 25.23 percent over the same period last year.

II. Analysis and judgment

The performance is in line with expectations, and the proportion of deep ploughing new business in the industry has significantly increased. 1. The performance fell into the forecast range, with a slight increase in net profit compared with the same period last year, revenue and deduction of non-net profit increased synchronously, and increased by about 1/4 compared with the same period last year. The revenue of company identity authentication and industry deep ploughing business reached 67.7 million and 78.45 million respectively, which decreased by 34% and increased by about 450% respectively compared with the same period last year.

2. The deep farming business of the industry has grown rapidly, and the proportion of income has increased to 52.89% from 12.08% in the same period in 2016, with an average gross profit margin of 48.49%. The traditional identity authentication business, which is mainly based on ID card reading machines, was affected by factors such as the deterioration of the competition pattern in the industry and the lower-than-expected progress of the promotion of "the integration of people and witnesses" in the whole industry, with revenue of 67.7 million yuan, down 34 percent from the same period last year. The main progress of identity authentication business is as follows: the first batch of foreigners' permanent residence permit function resident ID card to read the product list of machines and equipment; products that increase fingerprint verification are ready to be upgraded nationwide; new breakthroughs have been made in Internet identity authentication solutions.

3. We believe that the effectiveness of the company's deep ploughing program in promoting the four major industries has been reflected, with many new business growth points and rapid growth. At the same time, the company has actively developed business artificial intelligence business with sufficient stamina.

The deep ploughing and business performance of the industry is eye-catching, and the four major plates go hand in hand.

1. The growth rate of deep ploughing business in the industry is high, and the contribution of gross profit is outstanding. The deep ploughing business segment of the industry achieved revenue of 78.45 million yuan, an increase of more than 450% over the same period last year, accounting for 12.08% of revenue in the same period in 2016 and 30.84% at the end of 2016, further rising to 52.88%, and the average gross profit margin remained at a high level of 48.49%.

2. The revenue of mobile exhibition products is 13.44 million yuan, the gross profit margin is about 32%, and the revenue is up 37% from the same period last year, which is slightly lower than expected. the main reason is that the start-up speed of most bank projects that have won the bid / shortlist is generally later than the routine. As the project progresses, revenue from this part is expected to be confirmed in the second half of the year.

3. The income of silver doctor's self-service business is 41.98 million yuan, accounting for 53.51% of the deep farming business of the industry, and maintains a high gross profit margin of 51.09 yuan. The subsidiary Shensi Xuhui newly expanded hospital has more than 50 customers, including benchmarking first-class hospitals in Shandong Provincial Hospital and other regions, and continues to maintain the momentum of rapid growth.

4. The convenient payment income is 3.42 million yuan, which is slightly lower than expected, mainly because the product and market are not yet mature.

The company has completed the cash acquisition of part of the equity of Fujian Langfang Information Technology Co., Ltd., which will help to enhance the company's technical strength and profitability.

5. The revenue of the computer vision business reached 19.6 million yuan, an increase of 465% over the same period last year, and the gross profit margin reached 50.85%, an increase of 21.39% over the same period last year. The application field of products and services continues to increase, maintaining a good momentum of development.

6. We believe that, according to the strategic planning after the previous upgrade, the company gathers resources from all aspects on the basis of continuous research and development of software and hardware products for deep ploughing solutions in the industry. focus on promoting the optimization, improvement and implementation of the four deep ploughing solutions in the industry. The outstanding performance proves that the strategic direction is correct and the executive force is strong, and the consolidation and deepening of the industry will lead to the rapid growth of the company's business as a whole.

Deep technical foundation and high degree of commercialization of intelligent cognitive business

1. The company's third-tier main business focuses on industry service robots, intelligent upgrade of silver medicine self-service equipment and _ S um ma knowledge ry] knowledge management system. Based on the company's strong technology research and development capabilities, the company in the financial, medical, security and other industries customer architecture based on industry knowledge base intelligent cognitive solutions. For example, the financial industry intelligent service robot "Xiaoshen" has begun to be piloted in the bank outlets in Jinan, which can provide diversified services, divert the manual guard pressure of the bank outlets and improve the service quality to a certain extent; the new generation of intelligent silver medical self-service equipment has been piloted in Nanchang third-class first-class hospital with excellent performance. The company has completed the first phase of the construction of the police think tank in the local public security system, and the intelligent customer service center has been put into operation.

2. The company has basically completed the equity participation and capital increase of Baiying Technology (Beijing) Co., Ltd. Bing Technology applies machine learning and intelligent search technology to create a "smart brain" in the field of customer service, which has mature applications in China Mobile Limited, Telecom, Unicom Group and branches.

3. We believe that the company has strong technical strength in computer vision and voice interaction, has a high degree of commercialization, and the landing project runs smoothly, which lays the foundation for the company in the field of AI. At the same time, pay attention to endogenous development and start to try mergers and acquisitions, the integration of Bing Technology can effectively enhance the ability of intelligent knowledge base construction, speed up the implementation of the company's intelligent cognitive solutions in financial, public security and other stock industry customers.

Third, profit forecast and investment suggestions

Assuming that Inuowei consolidates and completes the IPO in the second half of the year, it is expected that the diluted EPS of the company in 2017, 2019 and 2019 will be 0.38,0.63 and 1.03 yuan, respectively, and the corresponding PE of the current share price will be 67X, 40X and 25x, respectively.

Considering the good progress of the company's transformation and broad prospects in the field of artificial intelligence, the company was given a reasonable valuation of RMB 26.6 to 28.5 yuan in 2017, with a reasonable valuation of RMB 26.6 to 28.5 in the next 6 months, and maintained its "highly recommended" rating.

Fourth, risk tips:

The promotion of deep ploughing projects in the industry is not as expected; the research and development of artificial intelligence is not as expected; and the competition in traditional business is intensified.