Deeply cultivate identity management, from equipment manufacturing to integrated identity information services. The company is deeply involved in the field of identity management. In recent years, performance has continued to grow rapidly, and gross profit margin and net interest rates have remained at relatively high levels. Benefiting from the continued rapid growth in R&D investment, the business line was further expanded, and the comprehensive strength was steadily improved. After years of development, the company's business continues to deepen, and has completed continuous upgrades from equipment manufacturers to solution providers to integrated identity information service providers. e-Passport: Product upgrades have spawned recent demand, increased penetration has opened up long-term space, and overseas business has entered a new period of rapid growth. The company's electronic passport card issuing equipment technology and products have reached the international advanced level, leading the domestic market share. E-passports require high specifications. In order to ensure uniform quality, passport issuing equipment generally needs to be upgraded in a few years. According to estimates of the early e-passport equipment investment cycle, demand for upgrades and replacements may enter a peak period. In the medium to long term, there is still plenty of room for improvement in China's passport penetration rate, which will spur demand for equipment. Furthermore, the company's overseas business has returned to a rapid growth trajectory. Products and customers are more diverse, and on-hand orders are abundant, and it is expected to enter a new stage of rapid growth. Smart Transportation: With a new round of aggregated payments, profit models are expected to be further enriched. The upgrading of public transportation payment methods has become a new trend. The company has advantages in the field of rail transit informatization, leading the industry in payment system transformation, and promoting a new round of integrated payments for public transportation. China's urban rail transit construction will continue to grow rapidly, and a large number of traditional payment modules need to be upgraded. Whether it is incremental demand or stock upgrades, there is plenty of room for integrated payment modules and payment systems, and the company is expected to fully benefit. In the public transportation sector, the upgrading of payment methods has also become a new trend. Based on the 700,000 bus fleet, the bus payment module alone has space of 1.4 billion yuan; while the price of the company's other products in the smart transportation sector, such as bicycle support such as driver safety management, is several times that of payment modules, and the market size will be more impressive. In addition, the company is deeply cooperating with Tencent, Ali, and UnionPay to promote the basic business of “QuickPass” and “ride code” on the one hand, and actively expand value-added business on the other. The profit model is expected to be further enriched. Smart finance has penetrated into more fields, and policies benefiting from smart government have been strengthened. Smart finance: Banking equipment evolved from automation to intelligence, while financial instruments penetrated from cash business to various fields, including notes, card issuing, virtual counters, etc. The company extends its technical and product advantages to customer business processing processes such as bank IC card application acceptance, document issuance, document management, security management, and information management. It has a good first-mover advantage and is expected to enjoy the release of intelligent demand. Smart government: The “Regulations on Social Insurance Administration and Administration Services (Draft for Comments)” require that people's governments at or above the county level should be equipped with personnel, places, facilities and equipment appropriate to the number of clients served. Assuming an average investment of 1 million yuan in a district and county, the market size would exceed 3 billion yuan. The company's smart social security products have entered a period of rapid development, achieved good results in 2018, and are expected to further benefit from the release of demand in the future. Investment advice: Considering that many businesses are expected to enter a new period of rapid growth and orders are also experiencing rapid growth, we adjusted the company's net profit forecast for 2018 to 2020 to 108 million yuan, 151 million yuan, and 208 million yuan, corresponding to PE of 35 times, 25 times, and 18 times, respectively. The company continues to deepen its identity management, smart devices have blossomed, and many businesses have entered a new period of rapid growth. Referring to the industry, the average PE is about 30 times that of the company. Considering its good industry position and growth, we gave the company 30 times PE in 2019, the corresponding target price was 33.48 yuan, and raised to a “strong push” rating. Risk warning: The promotion of relevant policies falls short of expectations, and changes in the international situation affect overseas business.