1. Overview of the incident Recently, the company held a press conference on the IoT strategy and acquisition of Tailing Microelectronics to announce the development strategy layout and measures of the company and Tailing Microelectronics in the field of intelligent IoT. 2. Analysis and judgment of Tailing Microelectronics is strong, and the IoT industry collaborates to derive new profit growth points 1. On February 25, 2017, the company signed a limited partnership agreement with Xinyu Zhongyu Gaopeng Xiangyun Investment Partnership and other relevant parties. The company used its own capital to subscribe for limited partnership shares of no more than 590 million yuan, of which no more than 400 million yuan was used to subscribe for Class A limited partnership shares and 190 million yuan to subscribe for Class B limited partnership shares. Wang Weihang, the company's largest shareholder and chairman, who holds more than 5% of the shares, subscribed to a Class B limited partnership share as the actual controller of the partnership's general partner. The IoT M&A Fund holds 82.7471% of Tailing Microelectronics's shares. 2. Tailin Microelectronics has strong strength in the field of low-power Bluetooth and multi-mode integrated chips. It has become the leading domestic leader in patents and R&D technology, and was once the only chip design company invested by Intel. Currently, Tailing has many key success stories in many application markets, such as smart lighting, smart homes, smart wearables, healthcare, new retail, online banking payments, logistics monitoring, etc. At the same time, the latest multi-mode SoC wireless chip supporting the low-power Bluetooth 5.0 standard was released. The product has excellent performance, can provide customers with a complete protocol stack, support most mainstream wireless protocol standards, and provide comprehensive support for fragmented IoT application scenarios. 3. We believe that the IoT merger and acquisition fund invested and jointly initiated by the company will complete the acquisition of Tailing Microelectronics. In the future, it will use Tailing Micro IoT chip core technology as a starting point, combine IoT platform solutions in advantageous industries, gradually improve complete solutions integrating data collection, calculation, management, and intelligent applications, explore new business models tightly coupled with the Internet of Things and big data, and explore new business growth points. IoT industry layout: “connection+platform+intelligence”, providing one-stop products and industry service solutions1. The company is based in the Greater China market, and its business direction involves cloud computing, big data, mobile Internet, Internet of Things, etc. Based on a deep understanding of customer business, it cooperates with many well-known domestic and foreign manufacturers to provide comprehensive solutions and “one-stop” services throughout the life cycle of IT construction in various industries. 2. Provide an end-to-end solution of “connection+platform+intelligence”, and the ecological layout is gradually improved. In terms of industrial ecology: in conjunction with relevant IoT industry funds, we will continue to improve the ecological layout through epitaxial mergers and acquisitions; in terms of technology research: carry out world-leading IoT research, focusing on smart IoT, industrial IoT, and edge computing technology and application research; in terms of chips: expand the leading edge of IoT chip core technology based on Tailing Microelectronics; and in terms of business planning: launch the “Internet of Things +” smart IoT action plan to provide the industry with intelligent IoT applications. 3. We believe that the company focuses on the industrial ecological layout and deep integration of the industry. Through a series of mergers and acquisitions and investment in IoT technology, the company combines its many years of experience in IT solutions to achieve a “connection+platform+intelligence” industrial layout. The IoT market is growing rapidly, and the company is expected to become an industry leader 1. According to Gartner research, the number of global M2M connections will reach 21 billion in 2020, with an average annual growth rate of 26.8%, and the IoT market size will reach 1.9 trillion US dollars. The Internet of Things will rely on the huge data value brought by massive terminal connections. It is a foundation for the intelligent industry, which in turn will push the industry to achieve a new digital transformation from a business perspective and create a new business development model. 2. We believe that with the development of 5G technology, the scale of the IoT industry is expanding. Based on stable industry customer resources in the fields of logistics, retail, environmental protection, tourism, and safety supervision, the company will continue to increase its market share by building basic software and hardware platforms and using terminal connections, and is expected to become a leader in some industries. 3. Profit forecast and investment recommendations The company's EPS for 2017 to 2019 is expected to be 0.19, 0.26, and 0.32 yuan, respectively, and the PE corresponding to the current stock price is 56X, 41X, and 34X, respectively. Based on the obvious technical advantages of the company's traditional business, the IoT business has huge potential for growth. The company was given 60-65 times PE in 2017, and a reasonable valuation of 11.4 yuan to 12.35 yuan over the next 6 months was maintained, maintaining the company's “Highly Recommended” rating. 4. Risk warning: traditional business market competition intensifies; acquisition business integration falls short of expectations; technology research and development falls short of expectations.