Key investment points Lay out the entire lottery industry chain and transform integrated printing service enterprises. After years of development, the company has evolved from a single note industry enterprise to a comprehensive printing service enterprise. Revenue has remained at a level of 600 million to 700 million yuan in recent years, and increased to 860 million yuan in 2014 due to the explosion of the Internet lottery business. After the company suspended the paperless lottery ticket purchasing business from February 25, 2015, revenue and net profit were greatly affected. In November 2015, the company's acquisition of Kexin Shengcai entered the field of instant invoicing, and gross margin will gradually rise. The company completed a fixed increase of 780 million yuan in September this year, providing sufficient cash flow for the layout of the entire lottery industry chain, and invested in the “Lottery Internet of Things Intelligent Management and Application Project” and the “Electronic Lottery R&D Center Project” to further enhance the company's comprehensive printing service capabilities and advance the strategic process of the entire lottery industry chain. The wholly-owned subsidiary of Wuxi Shuanglong will further strengthen the collaboration between the lottery Internet of Things and the lottery business to fulfill the performance promise. On the platform of Tuohongbo Co., Ltd., Wuxi Shuanglong's business has further developed and expanded, and the operating conditions are good and stable. Since the equity ratio has been shared, the 60% project has been successfully piloted in Fucai, Jiangsu. The company's acquisition of Wuxi Shuanglong and Wuxi Shuanglong as the implementing entity of the company's “Lottery Internet of Things Intelligent Management and Application Project” will rely on the location advantages of the East China region and the policy advantages of the national IoT model city in Wuxi City to expand IoT application projects based on the main lottery business, increase customer stickiness, and increase operating income and profit levels. Promoting mobile lottery sales, preparing for the future trend, channels (lottery license) and lottery types (content research and development) are profit points of the Internet lottery industry. In terms of mobile channels, the company obtained a Fujian sports lottery game and gaming platform construction license last year, and a telephone lottery ticket agency license. The company has now completed the development of the platform and is awaiting approval from the competent authorities. In terms of lottery types, due to the lack of innovative varieties in the country, the company has already laid out and prepared advanced lottery research and development, including the “e-lottery R&D center project,” which is expected to quickly occupy the market after policy opening up. The profit model of the lottery is generally divided into a buyout type and a split formula, and the sales share ratio of the general split formula is 1-2%. Even if online lottery sales are not open for a short time, there are still ways to monetize lottery types. The company has gained a lot from investing in lottery research and development, and has now stocked up a large number of lottery games. In addition to reporting and operating independently, the company can also act as a content provider to provide game products to other industry partners. The general trend of telephone/internet lottery sales. Focus on the first quarter of 2017. Judging from recent policies and tenders related to internet lottery tickets, the Ministry of Finance, the Ministry of Civil Affairs and other ministries and departments and the two lottery centers continued to try and improve the Internet lottery mechanism from the top down, and expectations for the reopening of online lottery sales continued to heat up. Judging from the estimated completion time of each project, the first quarter of 2017 may become a critical time window for opening up telephone lottery and online lottery policies. The company has extensive experience in online lottery ticket sales and has B2B and B2C qualifications at the same time. Before the Internet lottery sales were overhauled, the subsidiary obtained the lottery and sports lottery data access qualifications from various provinces, and established cooperative relationships with lottery websites such as Tencent, Alipay, and Suning. After years of development, the profit forecasting, valuation and investment rating company has become one of the leading enterprises in the lottery printing industry, with a large and stable market share; in the Internet lottery industry chain, the company also has many years of experience, and has accumulated quite a bit in upstream lottery research and development and downstream distribution channels. We believe that as the profitability of the company's future lottery printing business increases and the synergy between the lottery IoT project and the main lottery business increases, the comprehensive gross margin for 2016-2018 will gradually increase. At the same time, if the Internet lottery policy opens up in the future, the company's performance will experience explosive growth. We expect the company's main business revenue in 2016-2018 to be 760/988/1136 million yuan, and EPS is 0.02/0.09/0.13 yuan, respectively. The current stock price corresponding to 2016-2018 PE is 1341/266/187 times, respectively. The target price remained at 32.5 yuan, and the investment rating maintained “increased holdings.” Risks indicate the uncertainty in the implementation of telephone and internet lottery ticket distribution policies, the revenue of the thermal paper business falls short of expectations, and the progress of the IoT business falls short of expectations.