Company announcement: the company released its mid-2021 report, with revenue of 1.237 billion yuan in the first half of the year, down 1.89% from the same period last year. The net profit attributed to shareholders of listed companies was 255 million yuan, an increase of 33.5% over the same period last year. The net profit belonging to shareholders of listed companies after deducting non-recurring gains and losses was 231 million yuan, an increase of 46.87% over the same period last year. The EPS is 0.06 yuan.

The report meets expectations and increases investment in research and development. The company operated steadily in the first half of the year, with a comprehensive gross profit margin of 36.7%, an increase of 4.75 pct over the same period last year, mainly due to the derailment of Asia-Pacific No. 6 and Zhongxing 9A satellites, and the depreciation cost decreased compared with the same period last year. From the expense point of view, the sales / management / financial expenses are 0.18, 0.83, respectively, 0.16 million yuan, + 3.98%, 5.4%, 2.97%, 1.48%, 6.75%, 1.26%, respectively, and + 0.09, 0.47, 0.06 pct respectively. Excluding the impact of delayed cancellation of some marketing activities and social insurance premium reduction policy caused by the 2020H1 epidemic, the overall performance of expenses is stable. We continued to increase investment in R & D. in the first half of the year, R & D expenditure was 26.22 million yuan, an increase of 28.14% over the same period last year, and the R & D expenditure rate was 2.12%, an increase of 0.5 pct over the same period last year, which is expected to enhance the overall competitiveness of the satellite application industry. From a quarterly point of view, in the second quarter alone, the company achieved revenue of 653 million yuan, an increase of 0.14% over the same period last year, an increase of 11.82% over the previous quarter, and a net profit of 151 million yuan, an increase of 44.92% over the same period last year and 45.19% over the same period last year. The company is the second largest fixed communications satellite operator in Asia and the sixth largest in the world, with global network services covering more than 95% of the world's sea routes. At present, the company operates 14 commercial communications and broadcasting satellites, and five communications and broadcasting satellites under construction will also be completed after 2022, which will continue to promote the growth of the company.

Domestic business is growing steadily and overseas markets continue to make breakthroughs. On the domestic side, radio and television business is steadily on the rise. In the first half of the year, the company completed radio and television signal transmission for major events and continued to promote the development of high-definition radio and television programs, adding Beijing Olympic Games documentary 4K, Qinghai Satellite TV HD satellite transmission and Hainan Satellite TV and Inner Mongolia Satellite TV live satellite HD simultaneous broadcasting. In addition, the company has completed the live satellite test transmission of Beijing Olympic documentary UHD programs, promoting the formulation of satellite transmission standards and the promotion of ground terminals. With the continuous development of communications and emergency security business, the company provides high-quality emergency communication services for all previous rescue and relief efforts, such as Henan flood, Yunnan Dali forest fire, Sichuan Liangshan forest fire, and so on. System integration business won the bid Chongqing Natural Resources Security Dispatch Center Geological disaster Satellite Emergency Communication system construction project. At the same time, we will actively promote the expansion of existing users, vigorously develop government and enterprise users, and achieve business growth. Overseas, with the advantage of communication satellite resources, the company has provided stable and reliable satellite transmission services to local telecom operators, governments and enterprises in Southeast Asia, the Middle East and Africa for a long time. In the first half of the year, the company made progress in the Maldives market, expanding capacity and rent in rural universal service projects and oil and gas exploration applications in the Indonesian market, and achieving key breakthroughs in international business.

Satellite communications can eliminate the blind spots of ground communications, and the company's shipborne and airborne businesses continue to introduce new customers. Satellite communication, ground wireless communication and wired communication is an important part of modern communication, which has the advantages of wide coverage, large capacity and high reliability, and plays a role in eliminating the blind area of ground wireless communication and wired communication. From the perspective of application scenarios, new requirements such as high-definition programs and "moving ZTO Express" will accelerate the development of the satellite communication industry. specifically, high-definition programs will become the development direction of the radio and television industry. the bandwidth demand of radio and television stations for satellite transmission of radio and television programs is increasing. Satellite communication is the only or most economical communication solution for "moving ZTO Express". For shipborne communications, the global marine satellite communication bandwidth is seriously insufficient, for airborne communications, the domestic airborne WiFi penetration is expected to increase significantly in the future, for vehicle communications, high-throughput satellite signals are more stable and cover a wider range; remote areas and "Belt and Road Initiative" are expected to bring new growth space. In the first half of the year, the company accelerated the construction of industry application platform, and in terms of shipboard, the company expanded the capacity of broadband satellite communication networks in the Atlantic and Indian oceans, improving the global network service capacity. At present, the total number of ships on the net for the company's "Starlink" products has exceeded 7600, an increase of several hundred compared with the end of 2020. In terms of airborne, the company renewed the Ka Satellite Communication Network Verification Flight Agreement with Air China Limited, while Qingdao Airlines will upgrade its digital cabin service through the company's Ka high-throughput satellite.

Investment suggestion: as the only satellite communication operator with self-controllable commercial communication and broadcasting satellite resources in China, the company has high-quality communication satellite resources and rich frequency orbit resources. with international advanced, independent and controllable satellite Internet application service capability, high market share. With the construction and operation of high-throughput satellites in the future, it will bring new space for the company's performance growth. We expect the company's net profit from 2021 to 2023 to be 509 million yuan / 545 million yuan / 578 million yuan respectively, with an EPS of 0.13 and 0.14 respectively, maintaining a "buy" rating.

Risk reminder events: the risk of overseas operation; the risk that the expansion of high-throughput satellite market does not meet expectations; the risk of competition between different means of communication; the risk of macroeconomic cycle fluctuation; the systemic risk of market