Key investment points The market's perception of 263 is still stuck in the impression of “corporate email” and “corporate conference call.” However, it is not fully realized that after the advent of the 5G era, bandwidth conditions have improved dramatically, and video communication anytime, anywhere, and with higher definition will become an inevitable trend. After 3 years of adjustments, 263 is committed to the “Video +” main circuit, and is expected to become a leading manufacturer of “enterprise-grade cloud communication.” 5G enables higher-definition video communication anytime, anywhere. Driven by the need for more efficient and lower cost communication, enterprise communications have successively experienced analog communication and IP voice communication, and the future will definitely move towards higher definition video communication anytime, anywhere. However, there are many pain points in the current video communications market. First, due to current network conditions, only live video broadcasts with normal clarity can be achieved, and the video interaction experience still needs to be improved. The upcoming 5G will drive significant improvements in network conditions, and significant increases in bandwidth, latency, and mobility. Video communication anytime, anywhere with higher definition is expected to become a trend. Second, video conferencing systems from various manufacturers are currently not compatible with each other. We judge that the future of the video conferencing market will definitely move towards a model similar to the mobile phone communication market and email communication market: the separation of hardware systems from cloud service providers. Hardware vendors focus on providing high-quality and compatible terminal systems. Cloud service providers provide customers with cloud servers and unique IDs (IP addresses) compatible with all video hardware terminals. Aiming at the “Video+” main circuit, it is expected to build a leading “enterprise-grade cloud communication” service provider in China. First, 263 is the top five enterprise email service providers in China, providing enterprise email services for 130,000+ enterprises and 6 million+ enterprise users. This is the 263 user base. Second, in the “Video +” service launched by 263, the “263 Video Cloud” is extremely interoperable. It not only allows devices with different protocols to be directly interconnected, but also seamlessly integrates 263 conference calls, webcasts, and on-demand movies. It is a good solution to the pain points of poor compatibility and poor flexibility in the video communication industry. Third, 263 Video Interactive serves users from more than 1,000 large and medium-sized enterprises and well-known education and training institutions around the world. It occupies most of the market share in China, and has a strong reputation in the field of corporate live streaming. 263 relies on enterprise live streaming products and video conferencing products, focusing on increasing the layout of the education industry to provide educational institutions with a “cloud+ terminal” one-stop video service solution. We expect that in the future, online education will maintain medium- to high-speed growth of more than 30%, and 263 will consolidate and establish a leading position in the education industry through continuous market voice. Profit forecast estimate: We forecast 263 net profit of 163 million, 212 million, 259 million in 2019-2021, corresponding to the current market value (April 16, 2019), PE 44 times, 34 times, and 28 times. Considering the company's good development prospects in the video cloud communication and international dedicated line markets, the first coverage gave it a “prudent increase” rating. Risk warning: 1. Internet giants have entered video cloud communications, leading to a sharp increase in competitive pressure in the industry; 2. The scale of goodwill is large, and poor operation of some subsidiaries has led to impairment of goodwill; 3. Domestic operators have strengthened their internationalization strategies, leading to pressure on the international dedicated line business.