Incident: On January 28, Xiongdi Technology released its 18-year performance forecast. It is expected to achieve net profit of 106 million yuan to 112 million yuan in 2018, an increase of 33.31%-40.86% over the previous year. Comment: The performance was basically in line with expectations. The company released an 18-year performance forecast. It is expected to achieve net profit of 106 million yuan to 112 million yuan in 2018, an increase of 33.31%-40.86% over the previous year, which is basically in line with expectations. Benefiting from the strong market demand for smart transportation, identification and intelligent services and the company's accumulated technological innovation advantages, overall solution advantages and service advantages, the company's business development such as security document generation, intelligent scenario application, and bus aggregation payment is developing well. Innovative businesses such as digital identity, online license management, and intelligent bus transportation continue to advance, and the company's business scale is rapidly expanding. During the reporting period, the company's revenue is expected to increase by more than 50% year on year, driving continued profit growth. The net profit growth rate fell short of the operating income growth rate mainly due to the company's increased investment in new technology, new product development and domestic and foreign market expansion. Employee remuneration, R&D investment, and market development expenses increased significantly compared to the same period last year. At the same time, due to changes in the bus payment market pattern brought about by the implementation of mobile payments, the gross margin of the smart transportation business declined based on strategic considerations such as market share and subsequent application scenario card positions. Due to two factors, the company's net profit growth rate was lower than the revenue growth rate. Judging from the company's failure to execute contracts and the market opportunities facing new businesses, the momentum for the company's business growth is still sufficient. Security card leader, horizontal business expansion, broad demand for innovative business. The company is a domestic professional card overall solution provider. It is one of the few enterprises in the world that has mastered the electronic passport production and issuance technology system. The company has broken the monopoly of foreign companies in the Chinese market, has China's own brand advantage in the field of security cards, is technologically advanced, and has obvious core competitiveness. The company has successively provided a full range of services such as certification systems, full certification equipment, and personal certification centers for second-generation ID cards, electronic passports, social security cards, etc., for clients such as the Ministry of Public Security and the Ministry of Foreign Affairs. In recent years, on the one hand, the company has expanded its card business from the public security industry, which it was mainly facing, to the government enterprise, social security, finance and other industries, and launched new products such as smart self-service card devices in the social security and finance industries. On the other hand, it has launched new services such as online license management in the original public security industry. The market demand for the company's new products and services is broad, adding new profit growth points to the company. Smart bus travel solutions have obvious advantages, and companies are expected to reposition themselves. In the public transportation (bus+rail) industry, the company provides an overall microelectronic payment solution integrating various forms of online and offline payments. The company's payment acceptance terminals and solutions have covered more than 100 cities across the country, including Shenzhen, Chongqing, and Nanchang. Based on this, the company continues to expand its business areas, expand and integrate bus data portals such as intelligent dispatch and monitoring systems, passenger flow analysis systems, and bus peripheral management, and gradually build intelligent bus solutions and decision analysis systems with smart bus clouds as the core platform and supported by four major system platforms: micropayment, intelligent scheduling, passenger flow analysis, and operation services. The development of mobile Internet has promoted the rapid promotion of mobile payment methods such as QR codes and mobile phone NFC in the field of public transportation. Electronic payment acceptance terminals are integrating various payment methods such as smart cards, QR codes, and mobile NFC, and become an important operating port for public transportation big data acquisition and a core node for online and offline integration. Based on rich industry experience and customer and channel resources, the company has joined hands with Ali and Tencent to combine the company's overall solution capabilities and customer resource advantages with the platform advantages of Internet companies to jointly create a new path for the development of public transportation mobile payments The company's identification business is migrating from offline to online, speeding up the company's planning, layout, and development of offline and online identity management interconnection and online trusted identity authentication services, and gradually transforming from a hardware supplier to a service provider. Traffic monetization value in the bus payment scenario is huge. In the future monetization of the bus payment scenario, on the one hand, Xiongdi Technology may assume the role of a specific implementer. On the other hand, Xiongdi will integrate travel data other than payment and integrate it with third-party data from internet giants to provide more accurate services. We anticipate that the monetization value of future bus scenarios may be reflected in localized services and methods such as reverse diversion of offline traffic. In localized services, after integrating big passenger traffic data with big data such as shopping, finance, social networking, and dining collected by other platforms, it is possible to accurately portray individual user preferences and promote localized services close to user needs according to the user's location, thereby upgrading the accuracy of marketing. On the other hand, currently, with the disappearance of internet dividends, the cost of online traffic continues to rise, and the giants are all focusing their attention on offline traffic entrances. According to Ministry of Transport data, the number of bus travelers in China reached 90 billion in 2016. As a high-frequency and high-stickiness application, bus travel payments are expected to become a potentially huge offline traffic entry point. Investment advice: Considering the company's outstanding card position advantages, the company is expected to achieve net profit of 1.08, 150, and 20 million yuan in 2018-2020. The valuation corresponding to the current market value is 31, 23, and 17 times, giving it a “highly recommended” rating. Risk warning: The strategic development process falls short of expectations; the development of industry customers falls short of expectations; progress in technology development falls short of expectations; overseas business development results fall short of expectations.