Incident: The company disclosed its annual report on April 24, 2018. In 2017, the company achieved revenue and net profit of 885 million yuan and 112 million yuan, a year-on-year increase of 20.28%, a decrease of 6.54%, and EPS of 0.21 yuan, respectively. It is proposed to distribute $0.20 (tax included) for every 10 shares. Comment: Communications IoT sector: (1) Traditional communications business revenue declined. As 4G network stability increased and operators' demand for excellent network services declined, the company's traditional business declined. Communications business (including big data) achieved total revenue of 432 million yuan during the reporting period, a decrease of 9.8% over the previous year. (2) One-chip intelligence: The IoT business continues to expand rapidly. The Yixin Intelligence business includes three parts: industrial robots, RFID products, and IoT industry solutions. The combined revenue during the reporting period was 126.215 million yuan, 23.988 million yuan, and 211 million yuan, for a total of 246 million yuan. Facing the rapid release of downstream IoT demand such as asset management, Yixin Intelligence actively grasped the industry window to achieve leapfrog business development. Relying on its solid technology accumulation in the field of RFID, it has implemented IoT solution layouts in key industries such as asset management, public safety, transportation and logistics. During the reporting period, Yixin's comprehensive asset management solutions, railway system tool management solutions, and intelligent fire protection solutions for large enterprises have all been implemented on a large scale. Vocational education sector: The increase in the number of school-enterprise cooperation, category expansion, and revenue recognition adjustments have had a significant short-term impact on the education equipment business (1) Dingli University school-enterprise cooperation is progressing steadily, and brand collaboration is gradually being strengthened. By the end of the reporting period, the company had cooperated to build 15 Dingli Colleges, with about 11,000 students enrolled, while continuing to strengthen course research and development. Currently, it has developed 14 major categories, 37 majors, more than 800 courses, and more than 400 cases. Coupled with the help of the “double teacher” model, its educational service export base is more solid. With the increase in partner institutions and the maturity of operating experience, Dingli University has initially achieved scale and standardization, and the brand effect has been continuously strengthened. It is expected to achieve higher marginal benefits and lower marginal costs in future expansion. The company revealed in its annual report that it plans to establish no less than 10 new Dingli colleges (including semi-managed) in 2018, and school-enterprise cooperation continues to advance on a large scale. The revenue of the education service business (mainly Dingli University) during the reporting period was 99.98 million yuan, an increase of 27.44% over the previous year. (2) Equipment sales have declined sharply due to revenue confirmation adjustments, and long-term disturbances are expected to be limited. The sales revenue of the training equipment sales business during the reporting period was 71.2 million yuan, a year-on-year decrease of 59.63%. The sharp decline was mainly due to the company's delayed adjustment of revenue recognition from sales of training equipment due to the principle of prudence. However, based on the company's previous business rules, most of the affected equipment can complete terminal sales and confirm revenue in 2018. At the same time, company executives also announced promises to strengthen receivables management and extend the share lockdown period to show business confidence. Therefore, it is expected that this adjustment will be more of a short-term shock, and the long-term impact on the company's performance will be limited. (3) The acquisition of Shanghai Meidu to expand accounting expertise is expected to achieve business collaboration. During the reporting period, the company completed the acquisition of 100% of Shanghai Meidu's shares. The Meidu school-enterprise cooperative business model is consistent with Dingli University. The majors are mainly in finance and management. During the reporting period, the US achieved net profit of 18.94 million yuan, falling short of its performance promise of 25 million yuan, but in the long run, its contribution to the company's performance and incremental value will gradually be reflected. On the one hand, after the acquisition was completed, Meidu began exporting education services on a large scale with the company's support. The announcement revealed that it has cooperated with 4 universities and is expected to start enrolling students in 2018, which will lead to an increase in long-term performance. On the other hand, the acquisition has expanded the company's professional categories, which are expected to be incorporated into the Dingli College system in the future, and Meidu's advantages in overseas college resources, study abroad services, and qualification training can also be transferred to Dingli College, bringing greater added value to partner institutions and students. Investment proposal: The company's two main businesses, communications, Internet of Things and education, are working in the same direction. After 17 years of enhanced layout, 18 years have entered a period of performance release. Yixin Intelligence has mastered the core technology of the Internet of Things. The products meet downstream needs, have large market space and high gross margin, and are currently in a period of rapid revenue growth. In the education sector, Dingli University's school-enterprise co-construction method is in line with the changing demands of vocational education institutions. Relying on a mature curriculum system, dual teacher team, and operating model, it is now branded, large-scale and replicable. Joining Meidu to expand categories will strengthen competitive synergy and enhance the marginal benefits of future new projects. In the short term, new colleges established in 2016-18 are still expanding enrollment this year, and service fee revenue is expected to increase. Since accounting processing adjustments will continue in the future, considering the possible impact on this year's business structure, we adjusted our 2018 profit forecast to 210 million yuan, which corresponds to PE 20 times, and still has an undervaluation advantage. Continue to give a target PE of 25 times for 6-12 months, a target price of 9.47 yuan, and a “buy-A” rating. Risk warning: Market demand for network optimization has declined, education equipment sales revenue confirmation is uncertain, and cooperation and expansion between colleges and universities is weak.