High-quality medical IT enterprise, multi-segment field leader. 1) Medical IT full product line layout: through endogenous development and epitaxial mergers and acquisitions, the company has formed a full product layout of medical IT covering HIS, CIS, GMIS, intelligent diagnosis and treatment, and telemedicine, and has become a medical IT manufacturer with high quality. Following the policy trend, the early company launched a series of medical information products, completed the acquisition of Mijian Medical in 2015 and 2016, acquired China Shihan in 2017, and successively invested in Jinchuang, Maijian and other enterprises through industrial funds in 2018. Create "Rongke 3.0". 2) rich customers: the company's main customers are concentrated in medical, financial, education, power, telecommunications and other industries and government departments, including large hospitals, township hospitals, medical insurance and other institutions. 3) leading in the fields of ICU information systems and remote video diagnosis and treatment: many subsidiaries of the company are the leaders in domestic medical IT segments, while Shanghai Mijian is the domestic leader in CIS, with a high market share in the field of critical medical clinical information systems; Shenzhou Hanshi has great advantages in intelligent outpatient clinic and telemedicine.

The policy dividend of the medical information industry continues, and the high prosperity of the market continues. In recent years, the policy dividend in the field of medical information in China has been continuous, and the industry has developed rapidly. According to the data of the forward-looking Industrial Research Institute, the market size of China's medical information industry is 37.559 billion yuan in 2017, an increase of 12.50% over the same period last year, and is expected to reach 43.055 billion yuan in 2020. The prospect is promising. With the aggravation of the aging problem in the world, countries are also paying more and more attention to the construction of smart health care. Data show that the investment in China's intelligent medical industry is 70.6 billion yuan in 2018, an increase over the same period last year, and is expected to exceed 100 billion yuan in 2020.

The trend of smart city industry helps, and the government cooperates with each other. Under the background of technology and policy promotion, the industry of smart city in China has developed rapidly in recent years. The market size of smart city in 2018 has reached 7.9 trillion yuan, and is expected to reach 25 trillion yuan in 2022. Over the years, the company has ploughed deeply into the field of smart cities, with dozens of complete and experienced teams, 20 of whom have more than 10 years of project implementation experience, and have more than 300 cases in urban operation, comprehensive law enforcement, livelihood services, etc. Cloud computing, artificial intelligence, big data and BABA, Huawei, Tencent and Ping an have established cooperative relations, while working with city governments to build smart city ecology. For example, the company cooperated with Shenyang Municipal Government to establish Shenyang Wisdom City operation and command platform, realized the integration of online negotiation systems among multiple command centers, expanded the APP capacity of mobile phone command, realized video information GIS linkage on the wall display, and made up for the problem of inadequate video capture in blind areas of monitoring.

Investment suggestion: the policy dividend of the medical information industry is continuous, the high prosperity of the industry continues, the smart city develops rapidly, the company works with the government to expand its business, and its competitiveness is outstanding. It is estimated that from 2019 to 2021, the company will achieve business income of 828 million yuan, 1.072 billion yuan and 1.383 billion yuan, and realize net profit of 27.73 million yuan, 36.57 million yuan and 47.16 million yuan, corresponding to EPS of 0.05,0.07,0.09 yuan respectively. Considering that the company is in the stage of transformation, we believe that the PS valuation can better reflect the market value of each company. With reference to the PS valuation of comparable companies, the average PS of comparable companies in 2020 is 6.894 times, considering that comparable companies are all leading enterprises and have a certain valuation premium. At the same time, the gross profit margin and net profit rate of the company are lower than those of the comparable company. In a comprehensive consideration, we give the company 4.00 times PS in 2020, corresponding to the target market value of 4.288 billion yuan and the corresponding target price of 7.74 yuan per share for the first time.

Pro forma market capitalization: on September 7, 2019, the company announced that it intends to issue no more than 117.6 million yuan to raise funds, and Yuyou will be used to buy 70% of the equity of Jinchuang Information Company. Jinchuang Information is one of the earliest professional manufacturers in the field of medical record management software in China, with more than 2000 basic customers, including hundreds of Grade 3A hospitals, with a high market share. In this transaction, Jinchuang Information shareholders promised that the net profit of Jinchuang Information from 2019 to 2021 would not be less than 2500GUBG 3,000,000 RMB. If the target company is valued according to the bet performance, the average PE of the target company is 38.38 times that of the company in 2020. Considering that the comparable companies are all large dragon enterprises with a certain valuation premium, we give the target company 30 times the target PE in 2020, and the corresponding homing valuation is 630 million yuan. Coupled with the above valuation of 4.288 billion yuan, the market value of the pretest target after the completion of the acquisition is 4.918 billion yuan.

Risk hints: low expectations for medical informatization policies, low expectations for medical business development, low expectations for smart cities, intensified competition in the industry, and the risk of delay, suspension, suspension or cancellation of non-public offerings. the risk of information failing to fulfill its performance commitments.