Incident: On March 7, Mao Qingjiang, the controlling shareholder and actual controller of the company, plans to transfer no more than 21.5782 million shares (about 5.28% of the company's total share capital) to the state-owned venture capital Guangdong Yueke Zhihong Venture Capital Partnership (limited partnership) through an agreement transfer. If the transfer is successfully completed, Yueke Zhihong will become the company's third largest shareholder after Mao Qingjiang and Lei Hongwen. Comment: The card has obvious advantages in justice and public security. State-owned equity investment strengthens channel resources and financial strength. Guangdong KeZhihong is a venture capital and equity investment platform under Guangdong Yueke Financial Group Co., Ltd., focusing on investment in high-end equipment and next-generation information technology; its parent company, Yueke Finance, is a wholly state-owned enterprise authorized and operated by the Guangdong Provincial Government, with strong resource background and financial strength. Haoyun Technology developed rapidly with its competitive advantages in smart justice and public safety and financial IoT platforms. In 2018, Haoyun Technology achieved revenue of 765 million yuan, an increase of 34.31% over the previous year, and a net profit of 140 million yuan, an increase of 26.35% over the previous year. The company's business is mainly aimed at the government and large state-owned enterprises. Joining hands with Guangdong Science and Technology Finance will help expand the company's business channels, enrich the target of mergers and acquisitions and enhance the company's financial strength, continuously improve the business layout through external mergers and acquisitions, and further strengthen the company's core competitiveness in the fields of public safety, smart administration of justice, and financial IoT. The smart administration of justice and public safety business is about to explode, and external mergers and acquisitions improve the company's layout in terms of smart justice: the accelerated promotion of policies has brought an inflection point in the smart justice business to prominence. The smart justice solutions provided by the subsidiary Runan Technology were highly recognized at the National Conference on the Promotion of Information Technology in the Administration of Justice, with a clear first-mover advantage. In terms of public safety: Through innovative operating models and using the latest generation of self-developed smart IoT management platform products to provide smart public security services, a new situation has been opened up for public safety business. In addition, the company continues to improve its business layout through external mergers and acquisitions, which is a key scenario. In September 2018, the company acquired 53% of the shares of Guanwang Technology, a manufacturer of intelligent video image analysis and public data; in December, it signed a capital increase and equity transfer framework agreement with Xunzhimei to acquire 59.58% of its shares. After the transaction is completed, Haoyun Technology, Guanwang Technology, and Xunzhimei are expected to achieve collaboration between the two, and the company's competitiveness in the fields of smart administration of justice and public safety will be greatly enhanced. Profit forecast and valuation We forecast that the company's net profit for 2018-2020 will be 140 million yuan, 210 million yuan, and 275 million yuan respectively. The corresponding EPS will be 0.36, 0.53, and 0.70 yuan respectively. The corresponding valuations for the current stock price are 35, 24, and 18 times, respectively. Considering the explosion of the company's Runan Technology smart justice business in 19 and the implementation of projects such as Tongzhou and Xinji in Ping'an City, the company was given a valuation of 30 times PE and maintained a “highly recommended” rating. Risk warning: The implementation of the smart prison policy fell short of expectations; the security industry's prosperity declined; and the gross margin of the financial security business declined.