The results for the first half of 2016 are in line with the guidelines of the Interim Results Report. National Technology announced 1H16 results: operating income was 293 million yuan, up 29.7% year on year; net profit attributable to parent company was 45 million yuan, up 55.2% year on year, corresponding to earnings of 0.08 yuan per share. The results for the first half of the year were in line with the Express Report guidelines and were biased towards the upper end, but revenue was slightly lower than expected, mainly due to the decline in sales of USBKEY products in the first half of the year, and the revenue contribution of domestic financial IC cards did not improve because the market was not fully launched. The development trend of financial terminal main control chips drove revenue in the first half of the year. The company revealed that sales of USBKEY products declined in the first half of the year. The revenue contribution of domestic financial IC cards has not improved since the market has not fully started. The mobile payment chip RCC business is currently still exploring new operating models, so the revenue contribution is not significant. We expect the company's sales revenue to rise in the financial terminal master control chip market (secure storage chip), which can achieve a year-on-year increase in revenue in the first half of the year. Control management costs and rationally plan R&D expenses to achieve performance growth. The company balances medium- to long-term and immediate R&D investment, while strengthening supply chain management and reducing product costs; strictly managing various expenses and intensively allocating resources, profits will increase year-on-year. Long-term drive — Mobile payments are being launched at an accelerated pace, driven by Apple Pay, and national technology is a bottom-up driver. Since Apple launched Apple Pay, the mobile payment ecosystem has begun to expand, and mobile payments are on the rise. The RCC2.45GHz mobile payment solution, as a national technology patent technology, is another mobile payment solution other than NFC in China. 2.45 GHz technology has been tested in some second-tier cities in China, and the penetration rate is currently low. On December 30, the Ministry of Industry and Information Technology announced 8 national standards for approval on its official website. As the RCC standard is about to establish a national standard, the industry ushered in a breakthrough opportunity. Profit Forecast We raised our earnings per share forecasts for 2016 and 2017 by 0.02% and 0.04% from RMB 0.24 and $0.32 to RMB 0.24 and $0.32, respectively. Although sales revenue fell short of expectations, cost control capabilities improved, so profit forecasts for 2016 and 2017 were maintained. Valuation and recommendations Currently, the company's stock price corresponds to 54.4 times the 2017 price-earnings ratio. We maintain a neutral rating and target price of RMB 18.3, which is 5.29% higher than the current stock price. Based on 63x the price-earnings ratio for the next 12 months. Maintain a neutral rating. It is difficult for risky R&D investment to obtain the expected return on products, and the promotion of mobile payment and financial ICs falls short of expectations.