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Equity Research - Depth Report

[Table_StockInfo]
Three hundred and sixty ( 601 360) Overweight

Reasonable valuation: 40-47 yuan (Initial Coverage)

2018 year 05 month 03 day

[Table_BaseInfo]
Compared with a year Shanghai Composite stock movements Initial Coverage

1.5
Three hundred sixty The Shanghai Composite Index
For pure Internet subject from acquiring new things
1.0
grow
0.5 • Three hundred sixty has a huge user scale

Up 2017 At the end, three hundred and sixty Technology PC Security products market share 95.66% . 2017 Years, three hundred
0.0
D / 17 F / 18 sixty Technology of the average monthly number of active users 5.15 Million three hundred sixty Micro Mobile Security product

average monthly number of active users reached 3.50 Billion.

Stock data

Total equity / circulation (million shares) 6,764 / 397 • Three hundred and sixty to provide security services to get traffic, then cash from advertising, games, intelligent hardware

Price / circulation (million) 264,069 / 15,506 Three hundred and sixty of the core technology is security-related technologies, including core security technology and Internet
3,075
The Shanghai Composite Index / Shenzhen Component Index / 10,292 security technologies. Three hundred and sixty of these technologies will be packaged in different security products. Security +
12 Months, the highest / lowest (yuan) 66.50 / 7.96 product information content products brought about by the user, data traffic and finally to advertising, games, intelligent hardware as the export reali

• Advertising: three hundred sixty realized in the first chair, artificial intelligence boost future growth

Three hundred and sixty of advertising is divided into three categories: 1. Search advertising; 2. Display ads; 3. Brand advertising;

Securities analyst: High Yaohua major advertising pricing model is CPC / CPT / CPM . in PC End slow growth, when the mobile terminal is difficult to expand and
phone: 010-88005312 E-MAIL : gaoyaohua@guosen.com.cn improve CTR Will be the primary means of advertising revenue increased. Artificial intelligence will effectively help CTR Upgrade.

•
Securities investment consulting practice qualification certificate coding: S0980517060001
Game: tour page fading, poor hand travel channel operators, tour end faces Steam pressure
Contact: Huang net
phone: 010-8800-5313 E-MAIL : huangjing4@guosen.com.cn Page tour aspect, by hand tour page tour as a whole rise of the impact; hand travel aspects, in the case of mobile end foregone

conclusion, three hundred and sixty rely on existing channels is difficult to show explosive growth in the mobile games market; tour ends aspects ,

Steam Layout has been formed, for three hundred and sixty-side travel business with no small threat.

• Intelligent hardware business analysis: try to form ecological Things

Internet is a foregone conclusion. With the advent of the Internet of Things wave, three hundred sixty can combine their strengths

in brand, traffic, security technology, in-depth data layout, or will regain growth.

• profit prediction

The company is expected to 18-20 Annual revenues are 142.14 / 165.45 / 192.88 Billion, an increase of

16.1% / 16.4% / 16.6% ; His maternal net are 34.91 / 41.26 / 47.96 Billion, an increase of
3.5% / 18.2% / 16.2% ; EPS Respectively 0.52 / 0.61 / 0.71 Yuan; corresponding to PE Respectively

71.2 / 60.3 / 51.8 Times.

• risk warning

Risk growth rate less than expected; risk premium margin, during uncontrollable; artificial intelligence, networking and the

development of risk less than expected; the Unicorn, CDR Listed downside risks due to the scarcity.

Earnings and financial indicators ( 2016 For the three hundred and sixty years since data)

2017 2018E 2019E 2020E

Operating income ($ million) 12,238 14,214 16,545 19,288

(+ / -%) 23.6% 16.1% 16.4% 16.6%

Declaration of independence: Net profit ($ million) 3372 3490.78 4125.98 4795.58

(+ / -%) 80.1% 3.5% 18.2% 16.2%
Author ensure that the data used in the report are from compliance Diluted earnings per share (yuan) 0.50 0.52 0.61 0.71
channels, logical analysis based on my understanding of the profession, EBIT Margin 30.0% 28.2% 27.8% 27.6%
through sound judgment and concluded that seeks objective and fair
Roe( ROE) 21.0% 17.9% 17.6% 17.0%
conclusion without any third party's behest, influence and are hereby acknowledged.
Earnings ( PE) 73.7 71.2 60.3 51.8

EV / EBITDA 61.6 62.9 55.1 47.6

Book value ( PB) 15.49 12.78 10.59 8.83
source: Wind Guoxin Securities Economic Research Institute forecast Note: Diluted earnings per share calculated according to the latest total share capital

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Investment

Valuation and investment advice

The company is expected to 18-20 Annual revenues are 142.14 / 165.45 / 192.88 Billion, an increase of

16.1% / 16.4% / 16.6% ; His maternal net are 34.91 / 41.26 / 47.96 Billion, an increase of

3.5% / 18.2% / 16.2% ; EPS Respectively 0.52 / 0.61 / 0.71 Yuan; corresponding to PE Respectively

71.2 / 60.3 / 51.8 Times.

Taking into account the company's existing business and future prospects, as well as market valuation, we give the company

40.31 ~ 47.00 Per share valuation.

The core assumptions or logic

( 1 ) Growth rate: We assume 2018-2020 In advertising revenue grew 20% / 18% / 18% , Value-added services

revenues were up - 5% / 5% / 5% , Intelligent hardware revenue grew

20% / 20% / 20% ; ( 2 ) Gross margin: We assume 2018-2020 In a slight decline in the gross margin; ( 3 ) We assume

expense ratio company 2018 In the years after the rebound 2019-2020 In decline.

With market expectations at the differences

Three hundred and sixty market that will remain relatively high growth in the coming years. We believe that the short term, three hundred and

sixty has undergone rapid growth, now is a mature company. Three hundred and sixty to provide security services to get traffic, then from

advertising, games realized by two extrusion business model: traffic aspects, PC End traffic peaked, but the growth rate of the mobile terminal is

still faced with low use of long, low conversion rate and other challenges; cash business, advertising business is limited to traffic, the need for

meticulous management upgrade CTR ; Game page travel business in a recession, mobile games facing access problems, the opposite end

tour Steam rule. Intelligent hardware or become a new bright spot of three hundred and sixty. Although not yet currently has three hundred and

sixty killer application level, resulting in gross margin under pressure, but with the advent of the Internet of Things wave, three hundred sixty can

combine their strengths in brand, traffic, security technology, in-depth data layout, or re to grow. At the same time, we believe that three

hundred sixty future growth in artificial intelligence will play a key role, which will end in traffic, advertising realizable end, moving the hardware

side has a positive affect on the three hundred and sixty, need to focus on.

Catalyst for the stock price changes

Artificial intelligence can directly enhance advertising revenue, it can also be embedded in security software, software to enhance performance

and thus enhance customer satisfaction. Meanwhile, the application of artificial intelligence in intelligent hardware will effectively strengthen the

three hundred and sixty competitiveness in related fields. Zhou Yi As a pioneer of free antivirus software, and Lei Jun is also seen as a smart

mobile terminals importance of entrepreneurs, their market intuition and unerring eye it is beyond doubt. If Zhou Yi With 360 PC End share were

powerful end tour layout, or take creative approaches to subvert intelligent hardware market, through a collaboration of three hundred and sixty

brand image and huge user huge amounts of data, the uncertainty of things coming in the future, will greatly good three hundred sixty the

company. As the three hundred and sixty A It has a huge share in the few C End users and leading Internet technology company, enjoyed a

certain degree of scarcity premium. If the unicorn mass market, BATJ And other top Internet companies by

CDR Return to the country, the scarcity of three hundred and sixty will rapidly decline, valuations have three hundred and sixty adversely

affected.

The main risk of core assumptions or logic

the first, Risk growth rate less than expected; second, Gross

margin risk less than expected; third, Expenses beyond the

control of risks;

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fourth, Artificial intelligence, networking and the development of risk less than expected; fifth,

unicorn, CDR Listed downside risks due to the scarcity.

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Content Directory

Valuation and investment advice: 40.31 ~ 47.00 yuan .................................................. ............................. 7

DCF valuation: 36.79 ~ 47.00 yuan .................................................. ..................... 7

Valuation multiples method: 40.31 ~ 51.78 yuan .................................................. ............................ 7

Investment Advice .................................................. .................................................. .......... 7

Business Analysis: solid growth .................................................. .................................... 9

Game Business Analysis: tour page fading, hand travel channel is not strong, the end of the tour faces Steam pressure ...................... 11

Intelligent hardware business analysis: try to form ecological Things .................................................. ........ 15

Advertising analysis: three hundred sixty realized in the first chair, artificial intelligence or boost future growth .................. 17

Expense ratio net profit margin dropped significantly induced V Inversion .................................................. ........... twenty four

Signed an agreement for three years of high growth in net profit for the deduction of non-gambling .................................................. ........... 25

Business model analysis: get traffic through the provision of security services, after cash from advertising, games, intelligent hardware ..... 25

Traffic sources analysis: three hundred sixty Security Software PC End market is saturated or fast moving end growth, but face serious

challenges .................................................. .................................................. ............... 26

Listed history analysis: three hundred sixty original listing in US stocks, after the removal of VIE Return home ..................................... 28

risk warning .................................................. .................................................. ................ 30

Investment Advice .................................................. .................................................. ................ 31

Schedule: Financial forecasts and valuations (both three hundred sixty corporate data) .................................................. ..... 32

Guoxin Securities investment rating .................................................. .................................................. .. 33

Analysts promise .................................................. .................................................. ............ 33

risk warning .................................................. .................................................. ................ 33

Description of securities investment consulting business .................................................. ......................................... 33

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Table of figures

Map 1 : Three hundred sixty three business lines forecast joint history and circumstances Thailand (million) ........................................ 9

Map 2 : Huatai of three hundred and sixty 2019-2022 Different lines of business growth forecasts ........................................ 10

Map 3 : Three hundred and sixty different lines of business gross margin forecast Huatai joint history and situation ......................................... 10

Map 4 : Three hundred and sixty cases per capita output .................................................. ..................................... 11

Map 5 : Three hundred sixty operators game situation .................................................. ..................................... 12

Map 6 : Page tour example .................................................. .................................................. ..... 12

Map 7 : Tour exemplary end .................................................. .................................................. ..... 12

Map 8 : 2017 Global gaming market .................................................. .............................. 13

Map 9 : Three hundred and sixty gaming business split .................................................. ..................................... 14

Map 10 : STEAM Number of concurrent users .................................................. ............................. 15

Map 11 : Three hundred sixty intelligent hardware product line .................................................. ................................ 16

Map 12 : .............................................. exemplary text links .................................................. .... 18

Map 13 : Fung Mo examples .................................................. .................................................. ... 18

Map 14 : Fly picture example .................................................. .............................................. 19

Map 15 : Examples of mobile search promotion .................................................. ....................................... 19

Map 16 : Miracle text links ads example .................................................. ................................... 20

Map 17 : Moving end ad example .................................................. .......................................... 20

Map 18 : Brand direct examples .................................................. .............................................. twenty one

Map 19 : Mobile Brand Example .................................................. .............................................. twenty one

Map 20 : Brand direct examples .................................................. ....................................... twenty two

Map twenty one : Brand sunrise example .................................................. .............................................. twenty two

Map twenty two : Brand Zhen election example .................................................. .............................................. twenty two

Map twenty three : Application examples promotion .................................................. .............................................. twenty three

Map twenty four : Three hundred sixty revenue Net profit .................................................. ..................... twenty four

Map 25 : Split the cost situation during the .................................................. ....................................... 25

Map 26 : Three hundred sixty schematic diagram of the operational framework .................................................. ................................ 26

Map 27 : 360 a security guard .................................................. ............................................... 27

Map 28 : 360 Antivirus .................................................. .................................................. .... 27

Map 29 : 360 PC Security guards developments .................................................. ........................... 27

Map 30 : 360 Phone Guardian developments .................................................. ................................. 28

Map 31 : Three hundred sixty go VIE After the organization ............................................... ................................ 29

Map 32 : After three hundred sixty backdoor listing ownership structure .................................................. ......................... 29

Map 33 : Three hundred sixty listed to delisting shares .................................................. ................................ 30

Map 34 : 360 Listed to delisting PE (TTM) .............................................. ................................ 30

table 1 : Earnings forecast assumptions .................................................. ............................................ 7

table 2 : Sensitivity analysis, TV Growth rate (vertical axis) and WACC (Horizontal axis) ......................................... 7

table 3 : Divided into three hundred and sixty different modes ratio .................................................. .................... 11

table 4 : Tour page, hand tour, tour of the different characteristics of the end .................................................. ........................ 13

table 5 : Three hundred sixty major hardware Introduction .................................................. ............................... 16

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table 6 : Spin-off administrative expenses and cost of sales .................................................. ........................... 25

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Valuation and investment advice: 40.31 ~ 47.00 yuan

We intend to use the absolute valuation method (mainly discounted cash flow) valuation, supported by relative valuation method.

DCF valuation: 36.79 ~ 47.00 yuan

We believe that the short term, three hundred and sixty has undergone rapid growth, now is a mature company. Three hundred and sixty to

provide security services to get traffic, then from advertising, games realized by two extrusion business model: traffic aspects, PC End traffic

peaked, but the growth rate of the mobile terminal is still faced with low use of long, low conversion rate and other challenges; cash business,

advertising business is limited to traffic, the need for meticulous management upgrade

CTR ; Game page travel business in a recession, mobile games facing access problems, the opposite end tour Steam rule. Intelligent hardware or

become a new bright spot of three hundred and sixty. Although not yet currently has three hundred and sixty killer application level, resulting in

gross margin under pressure, but with the advent of the Internet of Things wave, three hundred sixty can combine their strengths in brand, traffic,

security technology, in-depth data layout, or re to grow. At the same time, we believe that three hundred sixty future growth in artificial intelligence

will play a key role, which will end in traffic, advertising realizable end, moving the hardware side has a positive affect on the three hundred and

sixty, need to focus on.

table 1 : Earnings forecast assumptions

2015 2016 2017 2018E 2019E 2020E

Revenue growth 19.66% 5.85% 23.56% 16.14% 16.40% 16.58%

Operating costs / operating income 23.53% 30.56% 26.93% 26.87% 27.74% 28.65%

Administrative expenses / operating income 44.61% 38.45% 25.12% 26.62% 26.12% 25.50%

Cost of sales / sales 24.25% 20.87% 15.58% 16.58% 16.58% 16.58%

Business tax and surcharges / revenue 1.87% 0.95% 2.06% 1.63% 1.73% 1.63%

Income Tax Rates 31.81% 23.33% 16.93% 16.93% 16.93% 16.93%

Dividend ratio 1.99% 181.64% 2.33% 2.33% 2.33% 2.33%

source: Wind Guoxin Securities Economic Research Institute finishing

use FCFF Valuation method to obtain the company's reasonable valuation range 36.79 ~ 47.00 yuan.

table 2 : Sensitivity analysis, TV Growth rate (vertical axis) and WACC (Horizontal axis)

8.7% 9.2% 9.65% 10.2% 10.7%

3.5%
58.67 52.80 47.91 43.77 40.23
3.0% 54.76 49.66 45.35 41.66 38.47
2.5% 51.49 47.00 43.15 39.82 36.93
2.0% 48.72 44.70 41.24 38.21 35.56
1.5% 46.33 42.71 39.56 36.79 34.34
1.0%
44.25 40.96 38.07 35.52 33.25
0.5% 42.43 39.42 36.75 34.38 32.26

source: wind , Guoxin Securities Institute of Economic Research

Valuation multiples method: 40.31 ~ 51.78 yuan

We believe, as three hundred sixty A The computer has a strong share in the few C End user subject, with scarcity, should enjoy a higher

valuation, while three hundred sixty artificial intelligence has landed fast search, intelligent hardware business, but also generate support for a

higher valuation. We consider the market's artificial intelligence-related stocks such as IFLYTEK ( 120x 2018E PE ), NavInfo ( 80x 2018E PE Valuation),

etc., as well as CDR Regression and Unicorn listed dilution effect caused, we believe that three hundred sixty valuation multiples at reasonable

valuation method 40.31 ~ 51.78 Between the yuan.

Investment Advice

Integrated absolute valuation and relative valuation method, three hundred and sixty in a reasonable price range 40.31 ~ 47.00 yuan.

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The company is expected to 18-20 Annual revenues are 142.14 / 165.45 / 192.88 Billion, an increase of

16.1% / 16.4% / 16.6% ; His maternal net are 34.91 / 41.26 / 47.96 Billion, an increase of

3.5% / 18.2% / 16.2% ; EPS Respectively 0.52 / 0.61 / 0.71 Yuan; corresponding to PE Respectively

71.2 / 60.3 / 51.8 Times.

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Business Analysis: solid growth

Advertising business line is three hundred and sixty largest source of revenue, although its 2015-2016 Growth is slow, but into

2017 After years of rapid growth; game business line is three hundred and sixty second largest source of income, the current development is

relatively slow; intelligent hardware business line 2015 Launched in 2016 In support of more than 160% Growth. The forecast given in accordance

with Huatai Securities, 2018-2021 Years, three hundred sixty revenue will be achieved CAGR 9% growth of.

2018-2020 In three hundred sixty revenues were 135.74 / 155.89 / 169.71 Billion.

Map 1 : Three hundred sixty three business lines forecast joint history and circumstances Thailand (million)

source: Jiangnan Jiajie Elevator Co., Ltd. major asset sales and issue shares to buy assets report (draft), Huatai Securities Co., Ltd. reply letter of inquiry on the Shanghai Stock Exchange, Guoxin Securities Economic Research Institute
finishing

Huatai Securities accordance with the prediction given by, where three hundred sixty business growth as follows:

• 2019-2022 In the first intelligent hardware business revenue growth, respectively 20% / 10% / 10% / 10% ;

• Followed by value-added services, respectively 17.64% / 17.78% / 8.55% / 8.66% ;

• In the next ad, respectively 13.68% / 6.59% / 6.38% / 6.45% .

Combined with three hundred sixty 2017 Annual report, we have different views on the three hundred and sixty future business growth. We

believe that three hundred sixty advertising business will have the highest growth rate, and three hundred and sixty of the game business will

remain under pressure, the growth rate of three hundred and sixty intelligent hardware in between.

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Map 2 : Huatai of three hundred and sixty 2019-2022 Different lines of business growth forecasts

source: Huatai Securities Co., Ltd. reply letter of inquiry on the Shanghai Stock Exchange, Guoxin Securities Economic Research Institute finishing

According to three hundred sixty 2017 Annual reports, advertising gross margin for the 81.43% , An increase 2.15 Percentage points; game

gross margin for the 64.51% Reduce year on year 1.52 Percentage points; intelligent hardware gross profit margin was

20.74% , An increase 10.89 Percentage points. Three hundred sixty advertising, value-added services gross margin showed a downward trend

in recent years, especially with larger decreases in value-added services. Intelligent hardware inventory clearance sale last year, gross margin

return to normal levels.

Map 3 : Three hundred and sixty different lines of business gross margin forecast Huatai joint history and situation

source: Jiangnan Jiajie Elevator Co., Ltd. major asset sales and issue shares to buy assets report (draft), Huatai Securities Co., Ltd. reply letter of inquiry on the Shanghai Stock Exchange, Guoxin Securities Economic Research Institute
finishing

2015-2017 Years, three hundred and sixty per capita output (defined Total operating income / ((number of early end to the number of +) / 2))

Respectively 199 Million, 187 Million, 187 Million, showed a relatively stable level, this is a signal the company entered a stable period of

development.

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Map 4 : Three hundred and sixty cases per capita output

source: Jiangnan Jiajie major asset sales and issue shares to buy assets Report (Draft) (Revised), finishing Guoxin Securities Economic Research Institute

Game Business Analysis: tour page fading, hand travel channel is not strong, the end of the tour faces Steam pressure

Three hundred and sixty of the game is a game publishing business, operations, marketing and service as an integrated resource platform

game. After three hundred sixty or agency to obtain the right to operate a game, the game developer will put a link to the game 360

The gaming platform, relying on three hundred sixty large user base to promote the game. According to three hundred sixty 2017 Annual

report disclosed, three hundred and sixty game business achieved operating income 16.92 Billion yuan, down year on year 35.25% Gross

margin fell 1.52 Percentage points. Game business is also very sensitive to traffic sources, currently the main source of three hundred and

sixty flow of the game is its own business flow. With three hundred sixty flow system stabilized itself, three hundred and sixty third-party traffic

will strengthen the procurement efforts, we expect that gross margin will continue to decline.

Game business is divided into two modes: Joint operation mode with Proxy mode . in Joint operation mode Under the unified management,

responsible for the promotion of three hundred and sixty games, online recharge prepaid receivables and customer service, game developer to

assume the obligation to maintain stability and the game server game props consumption data, the use of water into the way the two sides,

based on a certain percentage according to the game the amount of water carried into; in Proxy mode Next, in addition to providing services

under the joint operating modes, three hundred sixty but also in its own name to a third party authorized to operate related games, three

hundred and sixty copyright need to pay a fixed gold Xianxiang game developer, or to pay ladder mode to get power of attorney to carry out

water-sharing, proxy mode is divided into three hundred and sixty of the higher proportion.

table 3 : Divided into three hundred and sixty different modes ratio

Joint operation mode Proxy mode

Page tour 30% -60% 40% -70%

Hand tour 65% -80% 70% -80%

End tour 40% -60% 50% -70%

source: Huatai Securities Co., Ltd. reply letter of inquiry on the Shanghai Stock Exchange, Guoxin Securities Economic Research Institute

finishing

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Map 5 : Three hundred sixty operators game situation

source: Huatai Securities Co., Ltd. reply letter of inquiry on the Shanghai Stock Exchange, Guoxin Securities Economic Research Institute finishing

Page tour, refers to is based on PC Side browser online gaming network, its biggest advantage is no need to download the client, the

representative of the Immortals; hand tour, referring to the run of the game on the phone, it needs through the application store to download a

game to the phone, representative there are king of glory; end of the tour, referring to the tradition of relying on client PC The running game, its PC

Hardware configuration generally have higher requirements, the representative of StarCraft.

Map 6 : Page tour example Map 7 : Tour exemplary end

source: Web.duowan.com Guoxin Securities Economic Research Institute finishing source: sc2.replay.net Guoxin Securities Economic Research Institute finishing

Subject to different hardware processing, human-computer interaction conditions, the tour page, hand tour and end tours have different

characteristics. according to Newzoo The data, 2017 In the global mobile games market reached 461 Billion, an increase of 13.3% , Page travel market 45

Billion, an increase of - 9.3% End travel market 248 Billion, an increase of - 1.3% .

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table 4 : Tour page, hand tour, tour of the different characteristics of the end

Page tour Hand tour End tour

And more rely on the phone's touch-screen and And more, is a complex operation RTS The only platform
Game type Small, mainly vegetables and RPG
gyro can have a variety of play game

Moderate, phone GPU Has been very strong, but

also for the Retina-level resolution screen, the main Most do not need to consider power consumption, can
Game expressive Weak, mainly limited by the browser rendering
Dyeing capacity problem is the smaller screen produce amazing video effects

Game development costs

low - the high High, 3A Is one hundred million yuan level

Game developer
low Low - medium high
concentration

Game distribution Steam / Download a collection station / major

A collection of websites, pop Union app Store
channels manufacturers its own channels ( Origin / BattleNet)

source: Guoxin Securities Institute of Economic Research

Map 8 : 2017 Global gaming market

source: Newzoo Guoxin Securities Economic Research Institute finishing

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Map 9 : Three hundred and sixty gaming business split

source: Huatai Securities Co., Ltd. reply letter of inquiry on the Shanghai Stock Exchange, Guoxin Securities Economic Research Institute finishing

In the three hundred and sixty PC Let superiority terminal stage of the development of logical page tour. But with the rise of smart phones, took

out his cell phone anytime, anywhere characteristics of the game can provide a higher degree of convenience than the tour page, and

impressive visuals make the page travel is eclipsed, it is a direct result of the share of page tour seize a large number of hand travel, end travel

has been no small impact, three hundred and sixty swim revenue 2015 In only 12 Billion yuan, down year on year 40% , 2016

In continue to decline 17% . according to 2017 Annual Report, three hundred and sixty swim revenues continued to decline. Three hundred sixty

analysis, one is affected by the broader tour page, on the other hand is adjusting its operational measures resulting page travel short-term fluctuations.

There is no doubt that mobile Internet has reached a bottom field. according to Questmobile The autumn report, 2017

year Q3 China's mobile Internet overall growth slowed further, with close to stagnant growth in the long months when the single-use device,

users allocate more time to focus, the newly installed per capita APP Significantly reduced the number. According to Aurora Big Data

Q3 report, 360 Phone Guardian has 5000 Million for DAU , But the property makes its software tools as the ability to hand travel distribution

channels is not strong. The software has strong distribution properties 360 Mobile Assistant 1285

Ten thousand DAU Application only treasure 2687 Ten thousand DAU Of the half. Three hundred sixty weak in the mobile terminal restricts its

ability to distribute mobile games revenue.

The tour ends with the logical page and hand swim swim differ. Most end users travel to play brilliant picture effect, a strong sense of substitution

exciting story, and refreshing operation feeling generated, unlike hand travel down the page travel and in most cases is to kill time. Mobile

games development will swim casual side end users strongly diversion, the rest are more hard-core users, and those selected by the user either

game 3A Stand-alone masterpiece (the main flow as a stand-alone, but also Internet multiplayer mode), or else online games (such as DOTA2 ,

League of Legends, Heroes of the Storm, etc.), but for creative play. Correct 3A Masterpiece and strong networking game, they have a large

issuer of support, distribution, channel operators are firmly to control its own platform: EA Have Origin Blizzard has Battlenet Ubisoft has Uplay , League

of Legends Tencent, DOTA2 / CS: GO Have

Steam While there are creative game Steam platform.

Steam US video game business Valve to 2003 year 9 month 12 Launch digital distribution platform that provides digital rights management,

multiplayer games, streaming media and social networking services and other functions. With Steam The user can install and automatically

update the game, you can also use the community features, including buddy lists and groups can also use cloud storage, and in-game voice

chat. Steam By forcing the HalfLife and

Counter-Strike Bound gained popularity (game execution needed Steam Module), and in recent years along with the rapid rise of high-speed

network, number of concurrent users of over ten million, according to SteamSpy Estimates,

Steam2016 Annual income of more than 35 One hundred million U.S. dollars. Currently, most non-platform developed by the company are to

end tour Steam As the main development channels, and even some have their own distribution platform of 3A Masterpiece also landed Steam Platforms,

such as Assassin's Creed and so on. according to Genres The data, Steam On many as 26717

Two games ( 2017 year 11 month). the most important is, Steam In the game players get the same precipitation

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(Ie buy the game, Steam "Hi + 1 "), Also received a number of players precipitation social data ( Steam

Friends), formed a relatively deep moat, has become the game industry's Taobao. Its position in the deep, and game developer, deep

relations between the players, unless force majeure, difficult to overturn in the short term.

Steam By powerful channel control, at different times each year will launch a discount operations, discount rate from

10% -90% Range, at the same time, Steam The Chinese district to low-cost areas, the National District game pricing Bimei area, day area is

lower, more attractive to the Chinese users. Three hundred sixty future To force end tour, will face Steam Strong pressure.

Map 10 : STEAM Number of concurrent users

source: STEAM Guoxin Securities Economic Research Institute finishing

Intelligent hardware business analysis: try to form ecological Things

Zhou Yi As the older generation of Internet entrepreneurs who have business sense of smell is most sensitive person, very early aware of the

importance of intelligent terminals in the mobile Internet era, and try to layout. 2014 year 12 Month, three hundred sixty RMB 25 One hundred

million purchase of Cool 45% Shares, set up the odd cool company, that time, the odd cool yet fully realized independent research and

development and supply chain, owned the remaining Cool 55% Shares. 2015 year 5 Month, three hundred sixty spending 2.8 Cool odd one

hundred million yuan holdings of company shares to 49.5% . 2015 year 6 Month, music, as a subsidiary to

21.8 Cool enough to get one hundred million yuan 18% Equity, equivalent to the indirect shareholding odd cool 9% . The move brought Zhou Yi Very

angry, and various other factors together with three hundred sixty phone failed to capture the market, but also indirectly led to less than

expected three hundred sixty mobile terminal layout. 2015 year 9 month 18 Evening, 360 The company announced it has entered into a new

agreement with Coolpad on issues of joint venture equity adjustment odd cool technology. After signing the agreement, Coolpad technology

shares held by the odd cool 50.5% Drops 25% ,and 360 The company held by the odd cool Technologies AG will increase 75% .

After three hundred sixty intelligent hardware transition, we launched a watch worn like a smart, smart home video cameras, a series of

hardware products, the main Pan-safety concept, the use of OEM Mode of production; also work with other manufacturers introduced 360 Router

products.

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table 5 : Three hundred sixty major hardware Introduction

Children Smart Watch Intelligent children watch based on the children's security guard service, and gradually developed into specific groups of children, and a set of interactive health communication
Entertainment in one of the new intelligent hardware. Three hundred and sixty active in innovation, successfully developed a number of core technologies, watches through the

terminal, cloud services, mobile phone APP The three-terminal linkage, opened a child-centered interactive system, to solve the outstanding standby time on wearable devices

generally faced, positioning accuracy and coverage of core issues; in addition, three hundred and sixty also play technology, will artificial intelligence, big data, social and other

cutting-edge technology and application integration into the smart watch children, which greatly enhances the ease of use of the product.

Tachograph Tachograph dedicated to provide users with traffic safety services. By accumulated technology and practice in recent years, innovative, three hundred sixty

Tachograph and technology has become the industry leader; products 360 Internet service model as a product base, through large data traffic video image analysis, joint 360

Smart car and Research Institute OS , To build the future car safety networking has become a benchmark in the field of traffic safety products.

Smart Camera Smart cameras based on the security infrastructure that combines big data, cloud services, artificial intelligence technology, and gradually become home monitoring

The main product areas. Smart subdivision applications, including cameras to monitor children, pets and the realization of family communication. Three hundred sixty end

hardware products, cloud services, mobile phone APP Three-terminal binding, developed a number of smart cameras core technology, relying on 360 Brand and technology

innovation, 360 Smart cameras have occupied the top two smart cameras domestic consumer market.

source: Jiangnan Jiajie Elevator Co., Ltd. major asset sales and issue shares to buy assets report (draft), finishing Guoxin Securities Economic Research Institute

Map 11 : Three hundred sixty intelligent hardware product line

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

According to McKinsey predicted, 2025 Things annual contribution to the global economy will reach 11.1 Trillion yuan, accounting for the world GDP

The total 11% ; BI Intelligence prediction 2020 Global number of connected devices will reach 340 Traditional mobile billion, including smart

phones, tablet PCs, smart watches only the number of Internet devices 100 Million, while the number of connected devices will reach all 240 Billion.

The future, the market for intelligent hardware demand will rise further.

Advantage of three hundred and sixty entering of things: three hundred sixty brand is entering the first advantage of things. Through continuous

development in the industry, the three hundred and sixty " 360 "Into a well-known brand in the field of domestic Internet and Internet security, the

formation of brand, excellent for brand awareness and trust. The second advantage is the user. Three hundred sixty secure the initiator is free,

will 360 a security guard, 360 Antivirus and other security products free of charge to hundreds of millions of Internet users, with advanced

technology security products and a good user experience, three hundred and sixty successful development and accumulated a broad user

base, continued to keep the user stickiness, and establish a good brand image . The third is technical superiority, three hundred and sixty

network attack and defense technology, big data technology, cloud computing technology and artificial intelligence technology as a core

technology of the Internet to active defense, vulnerability discovery, virus killing as the main direction of the core security technology, building

the core Technology System. A strong technological advantage to give the product more trustworthiness. The fourth data, relying on the

security of long-term accumulation of large data base, holding

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Continued personal information for users in the field of security, life safety and other aspects of the field of personal escort. In the field of

Internet of Things products, on the one hand the advantages of data can be optimized intelligent hardware layout, on the other hand the product

can be accurate advertising, increase sales.

Of course, three hundred and sixty of things involved there are also disadvantages: the largest supply chain and warehouse management. For

hardware products, strong supply chain and warehouse management is to ensure that the core hardware products. There is no perfect

hardware development and test teams make hardware quality deficiencies.

In the context of large-scale development of things, three hundred and sixty opportunity to have a development: on the one hand, intelligent

hardware market is still huge. From sports, health, car networking, home fields, the development prospects of intelligent hardware is very broad.

On the other hand, is data security. One billion in the next few hardware interconnection, bringing large amounts of data at the same time will

bring a lot of data security threats, three hundred and sixty to secure the main things will make a difference in this market.

Similarly, there are three hundred and sixty in the Internet of challenge: three hundred sixty current flagship of things mainly in intelligent

hardware, however, three hundred and sixty hardware products single product technology content is not outstanding compared with competing

products, lack of killer function, which face strong competition in the homogenization, resulting in gross profit margin subject to greater pressure.

According to Taobao ordering, we found that three hundred sixty intelligent hardware facing strong price competition pressure. We believe that

three hundred sixty existing product revenue growth comes mainly from intelligent hardware industry growth, in the case of a high degree of

distinction, future gross margin increased significantly limited space. The next three hundred sixty continue to be the main security concepts,

group operations carried out by the development of new products, the formation of ecological things, combined with the three hundred and sixty of

their own advantages (such as artificial intelligence) form a unique function, before homogenization out of the trap.

Advertising analysis: three hundred sixty realized in the first chair, artificial intelligence or boost future growth

Ads between now and the foreseeable future will be three hundred and sixty first source of income. In general, Internet advertising has the

following modes:

• CPM : Cost per mile To ad mode as revenue recognition;

• CPT : Cost per try To long ad impressions as revenue recognition mode;

• CPC : Cost per click To a user click patterns as revenue recognition;

• CPA : Cost per action To act as the user completes the pre-conditions for revenue recognition model.

From CPM To CPA It requires the user receives the impressions, clicks to complete a specific action after the jump, so there are multiple

conversion funnel, in general, and more beneficial to advertisers funnel, to the detriment of Internet advertising company. Currently, three

hundred sixty major advertising pricing model is CPC / CPT / CPM .

Three hundred sixty advertisements divided into the following three categories:

1. Search advertising: search promotion is based on three hundred sixty search platform, through the three hundred and sixty unique matching technology,

Internet users to search for words matching the user to precisely locate the target to show product promotion marketing information

business. Including:

1) Search text links: Search text links is a Pay-network promotion, search

Promote the most common way to promote the most basic kind, but also users are most familiar with the ad style.

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Map 12 : Examples of text links

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

2) Fung Mo / Fung Mo Direct: Fung Mo through data mining, machine learning results from the promotion landing page,

Fung Mo materials and other data related to the rise of data to dig user search behavior, and to show in the search results, the

formation of Fung Mo creative style. Fung Mo is directly based on the original style in Fung Mo, conduct research for different

industries, according to industry characteristics, designed to be more advanced Feng Wu style features for the industry.

Map 13 : Fung Mo examples

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

3) Fly Picture: The picture is relying on the fly wing to wing sub chain of products, customers can bring more

The display styles, highlighting the brand position, enhance the user memory of the brand / product, so customers get higher

returns in the same budget.

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Map 14 : Fly picture example

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

4) Mobile Search Promotion: mobile search promotion is 360 Search based on various types of mobile devices as a medium load

A network to promote the body's way.

Map 15 : Examples of mobile search promotion

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

2. Display:

1) PC End: the miracle of text links including advertising, graphic standard display ads, product recommendations ads

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Map 16 : Miracle text links ads example

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

2) Mobile end: contains three hundred sixty Department and partners APP Embedded advertising

Map 17 : Moving end ad example

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

3. Brand advertising: brand advertising is based on 360 And search platform 360 Navigation massive show resources, in

Internet users use 360 Left and right side of the search results page at the top of the search and 360 A prime location in the top and

middle of the navigation, tailored for the enterprise to promote the brand display of precise form.

1) Direct Brand: Brand is based on direct 360 Massive search platform to show resources, search the Internet users

The top of the search results page tailored for the enterprise to promote the brand display of precise form.

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Map 18 : Brand direct examples

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

2) Mobile Brand Direct: mobile search results to top screen top end, the combination of graphic styles for ads

Customer show's official website, channel, event entry page.

Map 19 : Mobile Brand Example

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

3) Direct Brand: Brand promotion is based on direct 360 Search [Image Search] mass

Picture resource, when Internet users through the "brand word" search results page at the top of the area to show the form,

visually highlight the company's brand and products.

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Map 20 : Brand direct examples

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

4) Brand Sunrise: Sunrise brand is based on 360 Massive search platform to show resources, search the Internet users

The top of the search results page tailored for the enterprise to promote the brand display of precise form.

Map twenty one : Brand sunrise example

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

5) Zhen election brand: Brand Zhen election brand is expanding in direct form the basis for brand advertisers offer

Style brand advertising styles through a variety of templates mix and match to achieve brand promotion.

Map twenty two : Brand Zhen election example

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

6) Application Promotion: 360 Applications to promote their products to 360 Mobile Assistant, 360 Mobile guards to push

Wide platform, the application will be presented to the target user quality, enhance the brand effect, and effectively enhance

the installed capacity. Press the download billing.

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Map twenty three : Application examples promotion

source: 360 Official website, Guoxin Securities Economic Research Institute finishing

Overall, three hundred and sixty main revenue comes from advertising based on search engine advertising. Therefore, the search engine

market share of advertising revenue for the three hundred and sixty judgment is very important. according to Statcounter Data released from 2017

year 3 Months to 2018 year 3 Month, three hundred sixty desktop market share 26% About, remained stable, while three hundred sixty mobile

end market share is small step to rise from 0.25% To 1.62% . Therefore, we judge the desktop side, three hundred and sixty limited upside; less

mobile end three hundred and sixty of the market, it is difficult to contribute a substantial income.

Map : Desktop search market share Map : Mobile search market share

source: Statcounter Guoxin Securities Economic Research Institute finishing source: Statcounter Guoxin Securities Economic Research Institute finishing

in CPC Mode, factors that Internet advertising revenue = Price × ad clicks, ad unit price depends on the number of advertisers, advertising

scarcity and advertising market development, show the number of ad clicks = * click-through rate ( CTR , Click though rate ), And the number of

times the ad to show users frequency of use, long use, usage scenarios are closely related, and therefore, Internet advertising revenue = Fx (The

number of advertisers, advertising scarcity, the Internet advertising market market) * Fx (User frequency, length of use, the usage

scenarios) * CTR . In terms of the current market, the entire Internet advertising market is still in development, the main number of advertising

Internet advertising is also increasing; it is three hundred and sixty, the data show that users frequency of use, long are declining in use, while

the mobile terminal conversion process, since the display position of the non-limited feed Stream ads have greater limitations in the current PC / When

the mobile terminal market is a foregone conclusion, there is not the probability leopard change; it CTR For, according to the company to disclose

information, the use of intensive operations and other means, 2017 year 2

Quarter from 2016 year 4 Quarter PC end CTR An increase of more than 100% , Moving end CTR An increase of more than 30% ,Reached 0.84% about.

We believe that the future growth in excess of three hundred and sixty will rely mainly on advertising CTR To further enhance, and therefore have

higher requirements for meticulous management.

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Three hundred sixty established the Institute of Artificial Intelligence, responsible for research and development of artificial intelligence, artificial

intelligence techniques to build system and research system, and provide professional support to enhance the level of artificial intelligence of

three hundred and sixty products, with the core product development of cutting-edge artificial intelligence tools and software. We have always

thought that AI needs a special landing scenario, the search business is the most artificial intelligence quickly landing scene. By combining

artificial intelligence and search can be further improved three hundred sixty CTR , So as to enhance advertising revenue.

Expense ratio net profit margin dropped significantly induced V Inversion

From the entire company point of view, three hundred and sixty in 2015/2016/2017 Annual revenue growth year on year 20% / 6% / 24% , Then the

net profit margin 2014-2017 The annual V Inversion, expense ratio is mainly due to decreased substantially.

Map twenty four : Three hundred sixty revenue Net profit

source: Deloitte audit report, Guoxin Securities Economic Research Institute finishing

Three hundred sixty expense ratio during the 2015 In peaked up 69% Which accounted for administration expense ratio 45% , Cost of sales rate

accounted for twenty four% . enter 2016 Annual expense ratio fell during the three hundred and sixty 9 Percentage points, which the management

fee rate declined 6 Percent, cost of sales rate has dropped 4 Percentage points. Arrived 2017

Years, the cost of three hundred and sixty during the further decline in the management expense ratio decreased up 14 Percentage points.

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Map 25 : Split the cost situation during the

source: Jiangnan Jiajie major asset sales and issue shares to buy assets Report (Draft) (Revised), finishing Guoxin Securities Economic Research Institute

We will manage costs and marketing costs were split ( 2017 R & D expenditure in the annual report is not split in detail, so use 2017M1-M6 As

comparison data), results showed that, 2016 Reduce the expense ratio for the period was mainly the sharp decline in fees for technical services ( 15.96%

-> 2.60% , Accounting for the proportion of total revenue, the same below) and marketing expenses decreased ( 18.69% -> 15.15%) the result of.

table 6 : Spin-off administrative expenses and cost of sales

2014 2015 2016 2017M1-M6

Marketing expenses 15.66% 18.69% 15.15% 11.06%

Employee compensation and benefits 3.01% 3.99% 3.60% 3.87%

Equity incentive fee 0.53% 0.48% 1.34% 0.00%

other 0.66% 1.09% 0.78% 0.49%

Salaries and benefits - R & D 7.55% 8.53% 10.75% 14.03%

Fees for technical services - R & D 19.62% 15.96% 2.60% 1.09%

Bandwidth rental fee - R & D 4.72% 4.79% 5.91% 4.47%

3.84%
Depreciation and amortization expenses - research and development 4.13% 2.95% 2.40%

Other - R & D 1.11% 0.63% 0.74% 0.42%

Equity-based compensation expense - Management 2.57% 5.39% 9.02% 0.00%

Employee compensation and benefits - Management 2.15% 2.58% 3.49% 3.43%

Office expenses - Management 1.30% 1.34% 1.46% 1.55%

Professional service fees - Management 0.94% 0.93% 0.93% 0.51%

Depreciation and amortization - in addition to R & D 0.51% 0.44% 0.40% 0.38%

Other - In addition to R & D 0.55% 0.76% 0.79% 0.47%

source: Jiangnan Jiajie major asset sales and issue shares to buy assets Report (Draft) (Revised), finishing Guoxin Securities Economic Research Institute

Signed an agreement for three years of high growth in net profit for the deduction of non-gambling

The transaction, the current shareholders and Jiangnan Jiajie 360 Shareholders have signed a "commitment to performance and compensation agreement." 360

Shareholder commitment, 2017-2019 Consolidated statements year after deducting non-recurring gains and losses net profit attributable to

equity holders of not less than twenty two Billion, 29 Billion, 38 Billion, an increase of 196% , 32% ,

31% .

Business model analysis: get traffic through the provision of security services, from after

Advertising, games, intelligent hardware realization

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Three hundred and sixty of the core technology is security-related technologies, including core security technology and Internet security

technologies. Three hundred and sixty of these technologies will be packaged in different security products:

• To C software: PC End of 360 a security guard, 360 Antivirus, 360 Browsers, mobile terminals

360 Mobile guards, 360 Clean-up and other masters;

• To C Hardware: smart cameras, smart watches, driving recorder, car guards, etc.;

• To B / G Services: The Hunted platform Internet threat monitoring and early warning service ( DDos Mon , Scan Mon )Wait.

To install in C End user PC End / end mobile security software as traffic sources and channels, 360 We launched a series of information content

products, such as 360 search for, 360 navigation, 360 Entertainment, hoping it can improve user stickiness.

Security Products + user content product brought about by the flow of data and the last three hundred sixty advertising, games, intelligent

hardware as the export realization. According to related party transactions report, in terms of advertising cash, three hundred and sixty relies

mainly on " 360 search engine"," 360 navigation"," 360 Browser "," 360 Mobile Assistant "and other products; game cash terms, relying on" 360 Mobile

Assistant "(mobile terminal)," 360 Games Lobby"( PC +

Mobile end) channels such resources as a game operating platform, through wan.360.cn and youxi.com Page tour operators and end tour;

intelligent hardware realization aspect, three hundred and sixty to OEM A smart way to produce children watch, tachograph, smart cameras and

other products.

Map 26 : Three hundred sixty schematic diagram of the operational framework

source: Jiangnan Jiajie Elevator Co., Ltd. major asset sales and issue shares to buy assets report (draft)

Traffic sources analysis: three hundred sixty Security Software PC End market is saturated or fast moving

end growth, but face serious challenges

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in PC End, three hundred and sixty main product is PC a security guard, PC Antivirus, PC Secure browser, etc., which, PC Security guards are

three hundred and sixty of the most important products, the first edition published 2006 year. At that time the computer is still in XP Era, all kinds

of rogue software viruses emerging, PC Security guards appear a good solution to the user pain points, so rapid spread in the computer users.

Then, based on a large number of users security guards, three hundred and sixty launched anti-virus, security, browser and other products,

further established itself in PC End position.

Map 27 : 360 a security guard Map 28 : 360 Antivirus

source: Jiangnan Jiajie Elevator Co., Ltd. major asset sales and issue shares to buy assets report (draft), Guoxin source: Jiangnan Jiajie Elevator Co., Ltd. major asset sales and issue shares to buy assets report (draft), finishing

Securities Economic Research Institute finishing Guoxin Securities Economic Research Institute

2014-2016 year, 360PC Security guards maintain a growing user's monthly living, but as PC

End market saturation, 2017M1-M6 May live users appear a little decline. At the same time, with the movement of the end PC

Erosion end, when per capita daily use in long 2015 Years after reaching a peak into the downtrend. According to three hundred sixty 2017 Annual

report, its PC Security products market share 95.66% . This means that three hundred and sixty of PC Security products PC Fields have

a monopoly, but more than 95% The high penetration rate means that it is difficult to further enhance penetration. In the case of

penetration can not be further enhance and improve revenue depends largely on the three hundred and sixty of mining products means their

own potential.

Map 29 : 360 PC Security guards developments

source: Huatai Securities Co., Ltd. reply letter of inquiry on the Shanghai Stock Exchange, Guoxin Securities Economic Research Institute finishing

* : Conversion draw

compared to PC End, three hundred and sixty recent years more rapid development in the mobile terminal, the number of users from month to live 2016M1

To 2017M9 Almost doubled. According to three hundred sixty 2017 Annual report disclosed, as of 2017 In the end, three hundred and sixty

move live month to reach the end product 3.5 Billion. Obviously, this in the three hundred and sixty PC End of the month to live a certain degree

of disparity. We believe that the main reason is PC Ecology and different ecological movement caused by:

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for IOS , Its use of closed ecological, APP Apple has reviewed security, the demand for security software is not high, and low-level security

software can not operate; and Android Terminal separatist warlords, each mobile terminal manufacturers have wanted to build their own

ecosystem, do not take the initiative to non-factory pre-installed security products.

Not only that, do not grow when the per capita daily three hundred and sixty mobile terminal use 10 Minutes, and PC End of 300+

Minutes is quite different (of course, a lot of high-value mobile terminals per minute). With the mobile channel-acquisition costs climbed all the

way, in case the entire mobile terminal penetration is high, competition gradually established, how to fully exploit the realizable value of the

mobile terminal would be three hundred and sixty challenges faced in the mobile terminal.

Map 30 : 360 Phone Guardian developments

source: Huatai Securities Co., Ltd. reply letter of inquiry on the Shanghai Stock Exchange, Guoxin Securities Economic Research Institute finishing

2017 year 11 Month, three hundred sixty's "fast video" released in Beijing, the main 1-3 Minute short video market. Three hundred sixty believe, 10

second, 15 Second video, representatives deft, candy, etc., classified as a small video to life, such as the main selfie; 3-10 Min interval, classified

as short videos, such as video watermelon; and 20

More minutes, compared with the full version of the film and television drama, variety, etc., are classified long video, such as iQIYI and so on.

This suggests that the wave of ecological content, three hundred and sixty determined to sell a solid pace. However, with the deft, full vibrato

directional diffusion in the huge capital support, three hundred and sixty of " Fast video " Face greater challenges.

Listed history analysis: three hundred sixty original listing in US stocks, after the removal o

Return home

2017 year 11 month 2 Day, Jiangnan Jiajie issued "major asset sale, and issue shares to buy assets report (draft)", disclosed the company will

be a major asset restructuring, through the issuance to the shareholders of three hundred and sixty 63.7 Million shares (share price 7.89 Yuan)

+ asset replacement way, the price of three hundred sixty 504.16

One hundred million yuan into the listed company to achieve three hundred sixty backdoor listing.

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Map 31 : Three hundred sixty go VIE After the organizational structure

source: Jiangnan Jiajie Elevator Co., Ltd. major asset sales and issue shares to buy assets report (draft), finishing Guoxin Securities Economic Research Institute

After completion of the transaction, Hong Zhou Yi Direct holdings of listed companies 12.14% Of the shares indirectly controlled by the odd letter

Zhicheng Company 48.74% Of the shares indirectly controlled by Tianjin Zhongxin Company 2.82% Of the shares, the total control of the

company 63.70% Of the shares, as the actual controller of Jiangnan Jiajie.

Map 32 : After three hundred sixty backdoor listing ownership structure

source: Jiangnan Jiajie Elevator Co., Ltd. major asset sales and issue shares to buy assets report (draft), finishing Guoxin Securities Economic Research Institute

Qihoo 360 to 2011 year 3 month 30 Landing on the US Nasdaq market capitalization of 39 One hundred million U.S. dollars. After a slight

decline, the odd tiger 360 Stock prices move up, and in 2014 year 3 May reached a record high. After that, the odd tiger 360 The stock shock

downstream. 2015 year 6 month 17 Day, the odd tiger 360 Announced that the Board of Directors received a privatization offer, while Hong

Zhou Yi Released internal e-mail, claiming that time the odd tiger 360 The shares do not represent the odd tiger 360 Intrinsic Value; 2015 year 12 In

mid-May, the odd tiger 360 Privatization reach a final agreement;

2016 year 1 Month, China Merchants Bank and two other joint-stock commercial banks will serve as lead for the 360 Total transaction provides

privatization 34 Billion dollars of debt financing; 2016 year 3 month 30 Japan, the privatization agreement approved by shareholders; 2016 year 4

month 26 Day, the odd tiger 360 Privatization project by NDRC; 2016

year 6 month 28 Day, the odd tiger 360 Buyer received a notification letter on the consortium announced the latest progress of privatization; 2016

year 7 month 16 Day, the odd tiger 360 Announced the completion of the privatization, the company withdraw from the market, when the market value of delisting 9

2017 year 3 month twenty three Day, Huatai Securities and 360 The signing of the initial public offering and listing agreement counseling; 2017

year 6 month 13 Day, Jiangnan Jiajie suspension notice issued on major issues; 2017 year 11 month 2 Day, three hundred sixty backdoor

Jiangnan Jiajie official announcement.

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Map 33 : Three hundred sixty listed to delisting shares

source: wind Guoxin Securities Economic Research Institute finishing

according to Bloomberg Data, Qihoo 360 in 2011-2014 In enjoy a high PE Valuation, the highest point 174x in 2013 Reached, the

central valuation after the shock down, 2015 Years later, the average valuation level 40x PE Or less, dropping to the lowest level 23x

PE .

Map 34 : 360 Listed to delisting PE (TTM)

source: Bloomberg Guoxin Securities Economic Research Institute finishing

risk warning

the first, Risk growth rate less than expected; second, Gross margin risk less than expected;

third, Risks beyond the control of expenses; fourth, Artificial intelligence, networking and the

development of risk less than expected; fifth, unicorn, CDR Listed downside risks due to the

scarcity.

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Investment Advice

most A Computer-share listed companies in the main business model To G / To B , More general product, the bargaining power is not strong, the

scale effect is not significant. As the three hundred and sixty A Shares of the few computers have many excellent products and C End user

subject, scarce, should enjoy a higher valuation, while three hundred sixty have to make quick landing artificial intelligence search, intelligent

hardware business, but also generate support for a higher valuation. We consider the valuation of stocks related to artificial intelligence, such as

IFLYTEK, NavInfo other on the market, as well as Hong Zhou Yi Individuals with a strong spirit of innovation, plus room for growth in the field of

future things, that the three hundred and sixty at a reasonable price 40.31 ~ 47.00 yuan. The company is expected to 18-20 Annual revenues

are 142.14 / 165.45 / 192.88 Billion, an increase of

16.1% / 16.4% / 16.6% ; His maternal net are 34.91 / 41.26 / 47.96 Billion, an increase of

3.5% / 18.2% / 16.2% ; EPS Respectively 0.52 / 0.61 / 0.71 Yuan; corresponding to PE Respectively

71.2 / 60.3 / 51.8 Times.

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Schedule: Financial forecasts and valuations (both three hundred sixty corporate data)

Balance Sheet ($ million) 2017 2018E 2019E 2020E Income Statement ($ million) 2017 2018E 2019E 2020E

Cash and cash equivalents 10013 16828 21424 25937 Operating income 12238 14214 16545 19288

Receivables 2514 2920 3399 3962 Operating cost 3296 3819 4589 5526

Net inventory 104 134 152 182 Business tax and surcharges 252 232 286 314

Other current assets 639 827 985 1092 sales expense 1907 2357 2743 3198

Total current assets 13305 20766 26052 31321 Management fees 3118 3796 4334 4931

Fixed assets 475 460 539 621 Financial expenses (46) (336) (478) (592)

Intangible assets and other 314 301 288 276 Investment income 522 100 100 100

Investment property 2525 2525 2525 2525 Changes in fair value and impairment of assets (215) (251) (200) (222)

Long-term equity investment 4431 4431 4431 4431 Other income 31 0 0 0

total assets 21050 28483 33836 39174 operating profit 4050 4195 4971 5789

Short-term loans and trading financial liabilities 14 0 0 0 Non-operating net income and expenditure 69 69 69 69

Payables 2121 2685 3198 3849 The total profit 4119 4264 5040 5858

Other current liabilities 2234 5617 6348 6301 Income tax expense 697 722 853 992

Total current liabilities 4369 8303 9546 10150 Minority interests 50 52 61 71

Long-term loans and bonds payable 0 0 0 0 Net profit attributable to parent company 3372 3491 4126 4796

Other long-term liabilities 365 436 504 518

Total long-term liabilities 365 436 504 518 Cash Flow ($ million) 2017 2018E 2019E 2020E

Total Liabilities 4734 8739 10050 10668 Net profit 3372 3491 4126 4796

Minority interests 267 287 298 334 Impairment of assets 83 twenty four 11 27

Shareholders' equity 16048 19457 23487 28171 Depreciation and amortization 447 83 106 131

Total liabilities and shareholders' equity 21050 28483 33836 39174 Changes in fair value loss 215 251 200 222

Financial expenses (46) (336) (478) (592)

Key financial and valuation metrics 2017 2018E 2019E 2020E Changes in working capital 353 3418 668 (57)

Earnings per share 0.50 0.52 0.61 0.71 other (34) (5) (0) 10

Dividend per share 0.01 0.01 0.01 0.02 Cash flow from operating activities 4436 7262 5111 5128

Net assets per share 2.37 2.88 3.47 4.16 Capital expenditure (1) (330) (384) (448)

ROIC 37% 42% 99% 99% Other investment cash flow 148 (twenty two) (35) (55)

ROE twenty one% 18% 18% 17% Cash flow from investing activities (4284) (352) (419) (503)

Gross margin 73% 73% 72% 71% Equity financing 3003 0 0 0

EBIT Margin 30% 28% 28% 28% Net debt change 0 0 0 0

EBITDA Margin 34% 29% 28% 28% Payment of dividends, interest (79) (81) (96) (112)

Revenue growth twenty four% 16% 16% 17% Other financing cash flows 4544 (14) 0 0

Net profit growth 80% 4% 18% 16% Cash flow from financing activities 7389 (95) (96) (112)

Assets and liabilities twenty four% 32% 31% 28% Net change in cash 7542 6815 4596 4513

Interest rate 0.0% 0.0% 0.0% 0.0% Opening balance of monetary funds 2471 10013 16828 21424

P/E 73.7 71.2 60.3 51.8 Ending balance of monetary funds 10013 16828 21424 25937

P/B 15.5 12.8 10.6 8.8 Free cash flow 3845 6502 4205 4044

EV / EBITDA 61.6 62.9 55.1 47.6 Equity free cash flow 8389 6767 4602 4536

source: Wind Guoxin Securities Economic Research Institute forecast

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Guoxin Securities investment rating

category level definition

Buy Forecast 6 Within months, the stock outperformed the market index 20% the above

Stock Overweight Forecast 6 Within months, the stock outperformed the market index 10% -20% between

investment rating neutral Forecast 6 Within months, the stock market index performance between ± 10% between

Sell Forecast 6 Within months, the stock underperformed the market index 10% the above

Overweight Forecast 6 Within months, industry index outperformed the market index 10% the above
Industry
neutral Forecast 6 Within months, industry index performance between market index ± 10% between
ratings
Low with Forecast 6 Within months, industry index underperformed the market index 10% the above

Analysts promise

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