Leo Stock's 2016 performance was in line with expectations and exceeded the median performance guideline by 1.96%. The company achieved operating income of 7.354 billion yuan in 2016, up 67.44% year on year; net profit attributable to shareholders of listed companies was 571 million yuan, up 153.32% year on year; net profit after deduction was 529 million yuan, up 158.76% year on year. The performance increase mainly came from the performance of Wan Sheng Weiye and the Minimalist Era and Smart Fun Advertising for the full year of '16 and September 2016, and the performance was in line with expectations (performance forecast of 52-600 million yuan). The company's 2016 profit distribution plan is in line with previous disclosure intentions, and the high turnover shows strong confidence in development. The company plans to distribute cash dividends of 0.37 yuan for every 10 shares, with a total cash dividend of 59.4478 million yuan, a dividend rate of 10.41%, and an increase of 25 shares for every 10 shares of capital reserve funds. The digital marketing business is growing rapidly. The performance promises of subsidiaries have basically been fulfilled, and Wansheng Weiye has exceeded its performance promises by 21%. In 2016, the company's digital marketing sector achieved revenue of 5.357 billion yuan, an increase of 126.90% over the previous year, accounting for 72.84% of revenue, an increase of 19.09 percentage points over 2015, and has now formed a dual business model of “marketing as the main focus and manufacturing as a supplement”. Specifically, Shanghai Manku, Shanghai Argon Krypton, Amber Communications, Wansheng Weiye, Minimalism Era, and Smart Advertising achieved non-net profit deduction of 73.24 million yuan/30.65 million yuan/25.37 million yuan/22,479 million yuan/72.49 million yuan/58.19 million yuan, respectively, with performance completion rates of 100.33%/102.00%/99.48%/121.11%/100.68%/100.34%, respectively. Among them, Amber Communications fell short of its performance promise of 130,000 yuan due to amortization of equity incentive expenses. The company's transformation to digital marketing is firm. Nearly 3 billion dollars of convertible bonds have been injected and Leo Digital heads have joined the board of directors to add strength, with a target revenue of 10 billion dollars in 2017. The company plans to issue no more than 2,948 billion yuan of convertible corporate bonds to raise capital to invest in the construction of a digital marketing cloud platform, the construction of a big data processing and application center, the construction of a digital advertising trading platform, and the acquisition of the remaining 15% of Shanghai Manku's shares. Meanwhile, Zheng Xiaodong, president and director of Leo Digital, became a member of the company's board of directors, which will provide strong support for the strategic upgrading of the company's digital marketing business. Facing 2017, the company will unswervingly transform into the Internet industry with the goal of achieving 10 billion dollars in sales revenue. Investment advice: As a marketing leader, the company has always accurately grasped industry trends and demonstrated strong execution. At the same time, the three M&A funds are expected to continue to lead the industry trend layout. We expect the company to achieve endogenous net profit of 82/1.05 billion yuan/1.34 billion yuan/1.34 billion yuan respectively in 17/18/19, an increase of 44%/28%/28% over the previous year. Considering the performance flexibility brought about by the 11 billion M&A fund, net profit is expected to be 940 million yuan/1.2 billion yuan/1.52 billion yuan in 17/18/19, respectively, an increase of 65%/27%/27% over the previous year. Furthermore, it is not ruled out that there is still room for continued integration in vertical ecosystems such as interactive entertainment and automobiles in the future. Overall, a six-month target market value of 33 billion yuan is given, corresponding to the target price of 2,054 yuan, to maintain the purchase investment rating. Risk warning: industry growth rate is slowing down, competition risk, brain drain risk