In the first half of 2011, the company achieved operating income of 116 million yuan, a year-on-year increase of 61.69%; operating profit of 16 million yuan, a year-on-year decrease of 19.35%; net profit attributable to owners of the parent company of 013 million yuan, a year-on-year decrease of 23.89%; and basic earnings per share of 0.08 yuan. Revenue has increased dramatically through extended development. During the reporting period, the company's revenue increased dramatically, mainly due to the acquisition of 100 million yuan of China Post and Central Asia Internet, and the addition of two new businesses, software product sales and mobile e-commerce, achieving operating income of 7.209,900 million yuan and 18.6597 million yuan respectively. However, the company's original business, with the exception of website construction, which continued to maintain relatively rapid growth, increased by 58.33% over the same period last year to 28.1943 million yuan, the growth rates of corporate email and online domain names were only 6.6% and 7.01%, respectively, but the growth rate of online domain names improved. Overall, the company's original business has entered a mature stage, making it difficult to achieve relatively rapid growth. Therefore, if the company wants to achieve rapid growth, it must use new products. Through independent research and development, the company has gradually launched cloud office services such as 35Pushmail and 35PushoA, as well as various cloud-based smart mobile terminals - 35Phone and 35Pad - providing a complete set of new mobile Internet enterprise application solutions. However, we still need to verify whether the new product will succeed in the market. However, epitaxial development may be a relatively rapid development path for the company in the future, and we think it is worth looking forward to. The overall decline in gross margin stemmed from the merger of new businesses. The overall gross margin of the company's main business fell 5.19 percentage points to 74.01%, mainly due to the fact that the gross margin of sales of new software products and mobile e-commerce was 78.32% and 43.31% respectively, which was lower than the original business. If the new business was excluded, the overall gross margin remained stable at 80.3%. However, it should be noted that the gross margin of online domain names fell 6.04 percentage points to 36.89% year on year, and the decline was quite obvious. The increase in the cost rate during the period still requires attention. The company's period expense ratio increased 9.69 percentage points year-on-year to 57.48%. Among them, the sales expense ratio and management expense ratio increased by 6.47 and 3.47 percentage points to 43.95% and 17.07%, respectively. The company's sales expenses increased 89.59% year over year, mainly due to the increase in compensation expenses and advertising expenses due to the expansion of sales scale. However, management expenses increased by 103% year on year, mainly due to increases in remuneration expenses, research and development expenses, and intangible asset amortization. At the same time, the merger of China Post Company and China Asia Internet Technology Development Co., Ltd. added management expenses of 3.393 million yuan and 1,916,500 yuan respectively. Although the company's additional management expenses and sales expenses are mainly used to increase investment in business expansion, we think we still need to pay attention to whether new products such as the 35Phone and 35Pad can be recognized by a wide range of users in the market. Internal extension and epitaxial two-wheel drive. Internal extension development is the foundation for the company's continuous and stable development. The company takes advantage of cloud computing and the advent of the SME informatization era to actively promote fund-raising projects and improve independent innovation capabilities. While ensuring the leading position of the original business in the market, the company is speeding up the launch of new products and seizing the SME SaaS market. The company's newly launched mobile terminal products, 35phone and 35pad, install existing corporate email and application software on mobile terminals, and focus on integrating the SaaS management software product chain, which will further consolidate and strengthen the company's market position in SaaS software applications and services. However, we think it remains to be seen whether a breakthrough can be achieved in internal extension development. And epitaxial development will be a strong booster for the company's future development. In 2010, the company went public, and received a net capital of 415 million yuan and overraised capital of 268 million yuan, greatly improving the company's financial strength. The company used overraised capital to acquire 70% of the shares of China Post Information Technology Co., Ltd. and 60% of the shares of Central Asia Internet. At the same time, it also acquired 7% of AMIMON's shares, actively promoting epitaxial development. In the 2011 business plan, the company clearly proposed increasing capital operations and mergers and acquisitions in related fields to achieve integration of the industrial chain. We believe that access to the capital market provides strong support for the company's epitaxial development, and that external development will be an important part of the company's future development, and investors should pay active attention to it. However, how to effectively achieve extended development through mergers and acquisitions is also a long-term challenge facing the company now and in the future. Valuation and investment advice. We expect the company's EPS for 2011, 2012, and 2013 to be downgraded to 0.23 yuan, 0.31 yuan, and 0.36 yuan respectively. Based on the closing price of 11.28 yuan on August 25, the corresponding dynamic price-earnings ratio is 49 times, 36 times, and 31 times, respectively. The valuation is too high. We downgraded the company's rating to a “neutral” investment rating. Risk warning: 1. New business uncertainty risk; 2. Extended development uncertainty risk.