I. Overview of events

Recently, Jiuqi software released its semi-annual report for 2017: 2017H1 realized revenue of 599 million yuan, an increase of 37.99% over the same period last year, and net profit of 50.1395 million yuan, an increase of 217.83% over the same period last year. The net profit of non-parent was 46.7874 million yuan, an increase of 261.12% over the same period last year, and basic earnings per share was 0.0712 yuan, an increase of 217.86%. The net profit from January to September is expected to be 135 million-170 million yuan, an increase of 77.11% 123.03% over 76.2245 million yuan last year.

II. Analysis and judgment

Extension and performance increased significantly, Internet services are expected to continue to volume 1, performance increased significantly, Internet service performance is outstanding. The net profit of H1 performance forecast in 2017 is 4300-50.85 million, which is close to the upper limit of forecast. (1) by industry: the operating income of e-government / group control / Internet services / other business is 193.9043 million / 52.9781 million / 347.0904 million / 465.15 respectively, accounting for 32.39%, 8.85%, 57.98%, 0.78%, respectively, and an increase of 15.86%, 16.18%, 72.68%, 108.19% respectively over the same period last year. (2) according to product classification: software products / hardware services / technical services / information services / other businesses achieve operating income of 110.6766 million / 36.2797 million / 99.9262 million yuan / 347.0904 million / 465.16 yuan respectively, accounting for 18.49% 6.06% 16.69% 16.69% 57.98% 0.78% of which the information service is the Internet service. The five major products and services increased respectively-8.62%, 15.56%, 27.75%, 72.81%, 108.19% compared with the same period last year. (3) the gross profit margin of e-government and Internet services in the two major business sectors is 75.75% and 36.79% respectively, an increase of 2.00% and 2.82% respectively over the same period last year.

2, and express Ruiyi constant moving and Shanghai Mobile to thicken the annual performance. After the extension of the company into the Internet service, and expressed Ruiyi constant moving and Shanghai Mobile, the two subsidiaries contributed net profits of 8.0174 million yuan and 27.7165 million yuan respectively, totaling 35.7339 million yuan, resulting in a rapid growth of 217.83% net profit.

3. We believe that as the leader of the management and control reporting software, the company has a solid foundation of the two traditional businesses, e-government and group management, but with obvious seasonal factors, its profitability is expected to achieve outstanding performance in the fourth quarter.

At the same time, the company extends into the Internet field, and actively integrates to build the "long-term digital communication" brand. The performance of Internet services is good, with a profit contribution of more than 70%. It is expected to continue to increase in volume in the second half of the year and continue to thicken its annual performance.

The performance of major subsidiaries is good, and the development trend for the whole year is expected to continue. 1. Huaxia Dentsu's "Wisdom Court" expands smoothly and its performance is excellent. Huaxia Dentsu "Wisdom Court"

The promotion of business-related products and solutions in the field of courts at all levels across the country was relatively smooth, with revenue of 110.1148 million yuan, an increase of 8.14% over the same period last year, and a net profit of 40.3817 million yuan, an increase of 20.75% over the same period last year.

2. The performance of epitaxial digital communication business is good, and the effect of business integration needs to be further verified. (1) due to intensified market competition and overseas business platforms affected by relevant policies of Facebook Inc, Yiqilian Technology achieved operating revenue of 176.5492 million yuan, down 11.35% from the same period last year, of which domestic business income was 70.2544 million yuan and overseas business income was 106.2938 million yuan. However, Yiqilian Science and Technology optimized and adjusted its business structure in a timely manner, strictly controlled expenses, and realized a total net profit of 28.4065 million yuan, an increase of 37.16% over the same period last year. Ruiyi Hengdong officially launched its self-media full self-service advertising platform in early 2017, and the scale of its self-media delivery business expanded significantly; at the same time, businesses such as social marketing planning services and SCRM system product solution services also maintained steady development. Ruiyi Hengdong realized operating income of 54.128 million yuan and net profit of 8.0174 million yuan. (3) Shanghai Mobile was officially included in the scope of the company merger in April this year. Continuously increase investment in R & D and operation, improve the overall service level to customers, and vigorously open up new customers. Table has made great progress in such industries as transportation, tourism, express delivery and so on. Thanks to the increase in market demand and market share, Shanghai Mobile achieved an operating income of 192.2797 million yuan and a net profit of 44.1259 million yuan in 2017, contributing 27.7165 million yuan to the parent company.

4. We believe that the company's extension into the Internet field has successfully integrated its digital communication resources for a long time to achieve a substantial increase in performance, while e-government and group management and control traditional business has maintained a steady development, but the seasonal factors are obvious. and combined with the company's performance forecast for the first three quarters, the company is optimistic about the company's business development for the whole year.

Industry application continues to deepen, actively implement big data strategic goal 1, intensive cultivation in the field of e-government, and important areas bloom in an all-round way. The growth rate of e-government business is steady, continue to give full play to the advantages of focusing on the industry, and expand and deepen the layout in the fields of finance and taxation, transportation, justice, statistics, people's livelihood, education and so on.

2. The group's management and control business is expected to maintain a steady pace in the future. The group management and control business continued to polish the solution system with shared services as the core, and increased the market expansion of key industries, but it was affected by factors such as the start-up of some projects or the lag in acceptance, resulting in a slight decline in operating revenue compared with the same period. In the future, we will continue to dig deep into the construction industry, focus on breaking through the military industry, and strengthen the application of the financial and communications industries.

3. Establish a benchmark for big data's application, and continue to make breakthroughs in key areas. Based on customer big data's application demands and ecosystem support capacity, the company has launched industry solutions focusing on finance and taxation, transportation, justice, people's livelihood and media in big data's application field. With the continuous deepening of the application of the "Central Kitchen" project built for People's Daily (using the "big data + media" model to provide data analysis support for editors and journalists), in early 2017, Jiuqi Zhitong once again established cooperation with People's Daily. Signed the enterprise scene strategic cooperation agreement, the industry benchmark role is obvious.

4. We believe that the company deeply focuses on the industry, focuses on resource integration, deeply excavates the advantageous areas, actively implements the group strategic goal of "big data integrated service provider focusing on B2B2C", constructs and improves the "Jiuqi +" information ecosystem driven by big data, takes advantage of the opportunity to expand new Internet businesses such as digital communication, and innovates business models and business forms. To achieve the continuous improvement of core competitiveness and profitability.

Third, profit forecast and investment suggestions

It is estimated that the company's EPS from 2017 to 2019 is 0.52,0.78 and 0.94 yuan respectively, and the current share price is corresponding to 24x, 16x and 13x, respectively. Based on the strong stickiness of government and enterprise customers and the steady growth of traditional business, as well as the huge growth space of integrated digital communication business, the company is given 30-35 times PE in 2017 and a reasonable valuation of 15.6-18.2 yuan in the next six months, maintaining the company's "highly recommended" rating.

Fourth, risk tips:

Policy promotion is not as expected; the speed of technology research and development is not as expected; business integration is not ideal.