Net profit from the parent company increased 138.26% year on year, and performance exceeded expectations on the evening of August 17. The company achieved operating income of 441 million yuan in the first half of 2017, an increase of 297.45% over the same period last year; realized net profit attributable to owners of the parent company was 36.5015 million yuan, an increase of 138.26% over the same period last year; and realized net profit after deduction of 35.33 million yuan, an increase of 216.84% year on year. The performance exceeded expectations. The communications service business is developing steadily, and the rapid growth of the security business has led to high performance growth. The company's 2017 mid-year report performance exceeded expectations, mainly driven by the rapid development of the security business: communication network service revenue was 66.27 million yuan, down 5.95% from the previous year; while the security business grew rapidly, achieving revenue of 327 million yuan, an increase of 721.69% over the previous year. Relying on the central strategy of stabilizing Jiang and Xingjiang, the company has actively deployed in the field of security, and joined hands with the public security system to build an “integrated police integrated operation command platform” to lay out safety, provide customers with complete security solutions and operation services, and provide comprehensive services within the country. Benefiting from the successful listing of the company, a significant increase in influence and financing capacity, the ability to undertake projects has been directly improved. Therefore, against the backdrop of continuous large-scale investment in overall security system construction in the Xinjiang region, the company's security orders have increased rapidly. Actively participate in PPP security projects to ensure continuous and rapid growth in performance, the Development and Reform Commission and other departments actively promote the application of various PPP operation models in various regions in the infrastructure field to attract social capital, revitalize existing assets, and help form a virtuous investment cycle. Lion Technology closely followed policy changes, actively embraced the PPP model, and participated in tenders for a number of PPP projects, with remarkable results: the company announced on April 5 that it won a bid of 322 million yuan for the Kashgar rural video, bayonet monitoring and integrated joint combat platform system project. As a member of the consortium and Dahua Co., Ltd. won a bid of 387 million yuan for the Qimei County Ping'an City PPP project (China Procurement Network). Winning bids for these PPP projects will strongly guarantee the rapid growth of the company's performance. Furthermore, large-scale investment in local security projects in Xinjiang will also bring a large market for continuous operation and maintenance, and the company is also expected to continue to benefit. The central government and the Xinjiang government are making every effort to build the security industry in Xinjiang. Local enterprises are expected to fully benefit from the investment in Xinjiang security not only in the increase in project investment amounts. The central government and the Xinjiang government are also building frontier security industry clusters through various means, leading the better and greater development of the security industry. Local security enterprises are also expected to benefit fully and achieve rapid development through industrial power: On July 21, the National Engineering Laboratory for the Application of Big Data in Social Security Risk Perception and Prevention and Control was established in Urumqi, with the aim of establishing a testing platform for the application of integrated security data perception, analysis, and early warning technology. The direction is to form and transform a number of key technological achievements to promote the development of smart security and safe city industries in the autonomous region; a terahertz industrialization base dedicated to improving the level of the security inspection and security industry in Xinjiang was also settled at the end of last year, which is expected to drive the intelligent security industry into cluster development. The upgrade to the “buy” rating takes into account that the company's interim report performance has exceeded expectations, the industry continues to improve, and large orders continue to win bids. We have raised the company's profit forecast and estimated that the company's net profit from 17-19 was 86 million yuan, 122 million yuan, and 164 million yuan respectively, corresponding to the current stock price PE of 39 times, 28 times, and 21 times, respectively. Considering that the company is expected to benefit from high investment in security in Xinjiang, that its performance continues to exceed expectations, and that the company's rating has been raised to “buy,” we believe that the reasonable valuation range corresponding to 2017 is 45-49 times, and the corresponding target price is 37.8-41.16 yuan. Risk warning: risk of slowing investment in the communications and security industry; risk that policy promotion in Xinjiang falls short of expectations; risk that business development falls short of expectations.