I. Overview of events

Recently, Lianjian Optoelectronics released its semi-annual report for 2017: revenue in the first half of 2017 was 1.701 billion yuan, an increase of 70.75% over the same period last year. The net profit attributed to shareholders of listed companies was 185 million yuan, an increase of 29.02% over the same period last year. The deduction of non-net profit belonging to shareholders of listed companies was 176 million yuan, an increase of 43.52% compared with the same period last year. EPS was 0.3014 yuan, deducting non-EPS was 0.2867 yuan.

II. Analysis and judgment

The performance in the first half of the year is in line with expectations, and the integrated marketing service group is formed, and the synergy effect is obvious. (1) the performance is in line with market expectations. The company pointed out in the performance forecast that the return net profit was 175 million yuan to 215 million yuan, an increase of 21.94% to 49.82% over the same period last year, and the semi-annual report performance fell into the lower average range.

(2) the gross profit margin in the first half of the year was 30.93%, down 4.78 percentage points from the same period last year.

Revenue from digital equipment / digital outdoor / digital marketing increased by 22.64%, 76.46%, 131.46%, 31.65%, 23.51%, 44.74%, 36.44%, 33.85%, 25.42%, respectively, with a year-on-year change of 2.24%, 4.36%, 11.43%. (3) the expense rate during the period was 17.99%, a decrease of 2.29 percentage points over the same period last year, of which the sales expense rate, management expense rate and financial expense rate were 8.87% 8.76% and 0.36% respectively, which were 0.18% lower than the same period last year.

2. In the second quarter, the company achieved operating income of 997 million yuan, an increase of 59.20% over the same period last year, and its net profit was 111.9247 million yuan, an increase of 29.16% over the same period last year. The comprehensive gross profit margin was 29.41%, down 4.53% from the same period last year, and the expense rate for the period was 15.10%, down 3.48% from the same period last year, of which the sales expenses / administrative expenses / financial expenses were 7.15%, 7.66% and 0.29%, respectively, and were 0.33% lower than the same period last year.

3. The main reasons for the company's performance growth: the company has built an integrated marketing service group driven by big data with digital display, digital marketing and digital outdoor as the core, with obvious synergy and improved omni-directional marketing service ability. downstream customer resources continue to develop, the application field continues to expand, coupled with Lima network and so on.

The field of digital marketing services continues to expand, and the marketing scale has greatly increased. 1. During the reporting period, the company invested in Lanhai Purchasing to expand its real estate advertising business. It is proposed to increase capital and acquire a 100% stake in Beijing Epp New Media to strengthen the advertising promotion business with the mobile Internet big data platform as the core.

The company's Lima Network, Precision focus, Youtuo Public Relations and Litang Marketing can provide customers with all-round marketing solutions and effect marketing solutions covering brand public relations, interactive activities, Internet advertising and so on. Downstream customers include Internet, finance, FMCG, real estate, automotive, communications, energy and other fields. the brand covers a large number of high-quality customers such as Mengniu, Jiadobao, Unification, China Resources Yibao, Audi, Mercedes-Benz, Dongfeng Honda, Beijing Hyundai, Tencent, GIONEE mobile phone, Vanke, Poly, Wadi and the Fortune 500.

2. According to iResearch, China's online advertising market reached 290.27 billion yuan in 2016, an increase of 32.9 percent over the same period last year, of which the mobile advertising market reached 175.02 billion yuan, with a growth rate of 75.4 percent, much higher than the growth rate of the online advertising market, accounting for 60.3 percent. China Mobile Limited's advertising market is expected to be close to 500 billion yuan by 2019. As users' habits shift, the share of mobile advertising in overall online advertising will continue to grow in the next few years, and it is expected to be close to 80% by 2019.

3. We believe that the company's digital marketing sector expands rapidly, industrial resources integrate smoothly, downstream customers cover a wide range of areas, brand quality, and benefit from the rapid penetration and expansion of the mobile advertising market. The scale of the company's digital marketing business will continue to expand.

The network of digital outdoor media resources covers a wide range, and digital display has become the entrance of marketing service channels. 1. during the reporting period, the company continued to expand its own media resources and improve its outdoor media resources network. now its own outdoor media resources are divided into media, ocean media, Huahan culture, Xi'an Lvyi, Fengde Boxin, Tibet Bo TV and Shanghai Chengguang, combined with the company's digital display equipment. Maintain the company's leading position in the industry The region has covered outdoor advertising markets in Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, Nanjing, Taiyuan, Xi'an and Wuxi; the company has built an e-STM resource management system with 13090 media, 56050 media resources and 17.549 million square meters of media resources covering 342cities, which can provide customers with one-stop outdoor advertising solutions. In the face of the slowdown in the growth of traditional outdoor media, the company has accelerated the expansion of advertising resources in third-and fourth-tier cities and new media such as airports, high-speed trains, subways, parking lots and cinemas.

2. We believe that the company's digital outdoor section covers a wide area and is rich in media resources. combined with the company's outdoor LED equipment and media technology, it can provide customers with high-quality, localized, one-stop outdoor advertising solutions and become the entrance of integrated marketing service channels, which is the company's core competitive advantage.

Figures show that the industry remains in the lead, LED small spacing is booming, and downstream demand continues to grow 1. During the reporting period, the company showed product exports of 307 million yuan, accounting for 57.05% of all LED display business. Now it has a sales network, pre-sales and after-sales teams and downstream customers covering more than 100 countries and regions, including the United States, Germany, Brazil and so on. The company released the latest RA series leasing LED screen and V ·Me series and other small spacing LED screen products, which are widely used in the military, meteorology, airport, public security, transportation, security and other fields.

2. We believe that the company's LED display screen market is highly competitive, with European subsidiary Artixium, overseas marketing network and customer resources are rich, and the digital display business can improve the ability of advertising equipment to connect users and strengthen the company's digital integrated marketing service ability. In the context of LED small spacing and high prosperity, the company will continue to benefit.

To reiterate the point of view: the employee stock ownership plan has been unlocked for a long time, highlighting long-term development confidence. 1. The company completed the first phase of the 2017 employee stock ownership plan in June, buying back 2194569 shares of the company with an amount of 44998595.9 yuan, accounting for 0.3576% of the company's total share capital. The average transaction price is about 20.4984 yuan per share. The total fund of the second phase of the employee stock ownership plan in 2017 is capped at 195 million yuan, and the participants are no more than 100 employees of the company.

2. The unlocking time period is long. The lock-up periods for the first phase of the employee stock ownership plan are 12 months, 24 months, 36 months, 48 months and 60 months respectively after the completion of the transfer. The underlying stock shall be unlocked in five phases 12 months after the completion of the transfer, with a rate of 20% each time. The locking period of the second phase is 12 months and 24 months respectively, and the unlocking ratio is 50% and 50% respectively.

3. We believe that the two-phase employee stock ownership plan comes from the shares repurchased by the company, which will have a positive impact on the company's stock price: the first phase will be unlocked for a long time, which will help attract and retain talents and help the company's long-term development; the second phase will cover a wide range of areas and have a large scale. it will stimulate the enthusiasm of the core employees of the company and enhance the endogenous development motivation of the company.

Third, profit forecast and investment suggestions

Considering that the company implemented the employee stock ownership plan in 2017, the exercise price of equity incentive was 24.40 yuan per share on May 17, 2016, and the current stock price is highly secure. Based on the flexibility of the company's performance growth, the company can be valued at 30-35 times in 2017, and a reasonable valuation of 29.10-33.95 yuan in the next 6 months, maintaining the "highly recommended" rating.

Fourth, risk tips:

1, the performance of the acquiring company is not as expected; 2, the business integration of subsidiaries is not as expected; 3, the competition in the industry is intensified.