Incident: 35 Internet released its 2010 annual report. The annual report showed that the company's main revenue was 173 million yuan, an increase of 35.9% over the previous year, and net profit attributable to the parent company was 35 million yuan, an increase of 1.14% over the previous year. At the same time, a 10-year profit distribution plan was announced, with a cash dividend of 2 yuan (tax included) for every 10 shares based on the current total share capital of 120 million shares. Comment: Rapid revenue growth and sharp expansion of expenses. In 2010, the company's revenue increased 35.9% year on year, mainly due to high growth in website construction (44%) and the merger and acquisition of Beijing Yi China Post. The growth rate of the company's main business email has remained stable (17.6%), and growth is expected to accelerate in the future with the integration of China Post and the promotion of value-added email products. Net profit attributable to the parent company increased 1.14% year on year, far lower than the increase in revenue during the same period, mainly due to the sharp increase in sales expenses and management expenses. Sales management expenses increased 91% year over year, mainly due to the expansion of personnel and the increase in per capita salary. In 2010, the merger and acquisition of 100 million China Post increased sales management expenses by about 5.46 million yuan. In total, sales management expenses affected the net profit growth rate of 66 PCT. Share the main products of high-growth companies in the SaaS industry. Enterprise email, website construction, and network domain names are in the business-driven stage of SME informatization construction. The company's existing product 35OA and CRM management software for fund-raising projects are management-driven products. Products such as enterprise email not only provide a stable profit stream for the company, but also provide a potential customer base for future OA and CRM software expansion, which is conducive to extending the company's product chain and increasing the customer's APRU value, while the application of OA and CRM software further increases customer stickiness and ensures the stability of the company's customers. According to CCID statistics, the domestic SaaS market will grow at a rate of about 30% in the future, and the company's accumulated rich customer resources and practical products will support the company to share the high growth of the SaaS industry. The merger and acquisition expansion company invested 25.9 million yuan to acquire 70% of Beijing Yizhongmail's shares in September 2010. The merger and acquisition effectively expanded the market share of the enterprise email business through the merger and acquisition, entering the government, universities, and telecom companies. It is expected to increase net profit attributable to the parent company by about 5.5 million yuan in 2011 and increase EPS by 0.065 yuan; the company invested 5,900 to 124.7 million yuan to acquire 60% of Central Asia Internet's shares. It is expected to enter the rapidly growing mobile e-commerce market in 2011. The company's net profit was about 11 million yuan, and EPS was increased by 0.14 yuan. Smart terminals are a powerful or rapid performance growth point. The company held a press conference for the 35 phone and 35 pad new product terminals. The 35 phone and 35 pad all use the mainstream configuration of high-end smart terminals and an open Android system, and integrate applications such as enterprise email, 35OA, and 35CRM. The market positioning is clear, and the market positioning is clear, and will effectively utilize the company's accumulated customer resources in cloud computing applications. IDC predicts that the Asia Pacific smartphone sales volume will reach 137 million units in 2011. The smart terminal product market is broad, and the company's terminal products may become a flashpoint for the company's performance growth. However, since smart terminal manufacturers are mainly IT industry giants, such as Apple, Blackberry, HTC, Huawei, etc., the company lacks experience in developing and selling smart terminal products, we are cautiously optimistic about the company's smart terminal sales. The “Critical Recommendation” rating is estimated to be 0.72 yuan, 0.84 yuan, and 1.15 yuan for 2011-2013, respectively. According to the latest stock price, the corresponding PE is 36.x times, 30.x times, and 22.x times, respectively. We are optimistic about the company's high-quality products and rich customer resources in the SaaS field, and its strategy to expand to smart terminals, and give a “careful recommendation” rating.