Main opinion 1. The performance of the first half of the year declined slightly due to temporary factors. The company's operating income in the first half of the year declined due to the fact that delivery and acceptance of product order contracts signed by the company this year was concentrated in the second half of the year (revenue was 84.67 million yuan, down 2.91% from the previous year). Among the company's main businesses, aero-engine electronics products and professional technical services achieved rapid growth (aero-engine electronics products achieved revenue of 19.0604 million yuan, an increase of 120.67%; professional technical services achieved revenue of 12.5007 million yuan, a year-on-year increase of 215.67%), and aviation inertial navigation products achieved revenue of 51,432 million yuan due to seasonal effects of order delivery, a year-on-year decrease of 29.10%. In terms of net profit, the company achieved net profit of 16.564 million yuan in the first half of the year, a year-on-year decrease of 9.35%, mainly due to the rapid increase in the absolute amount of accounts receivable brought about by the increase in the company's business scale, and the resulting increase in accrued bad debt losses. However, since the company's customers are mainly the domestic military, A-share listed companies and their subsidiaries, etc., the risk of recovery of accounts receivable is low, so far there have been no bad debts. We believe that the main factors affecting the company's performance in the first half of the year were normal and temporary, and we are optimistic about the company's performance throughout the year. 2. Aeronautical inertial navigation: Revenue declined in the first half of the year due to the seasonality of order delivery. The modification of certain types of navigation computer components passed the inspection. The company's aviation inertial navigation products include: flexible Jetlink inertial integrated navigation systems, fiber-optic inertial integrated navigation systems, laser Jetlink inertial integrated navigation systems, piezoelectric inertial integrated navigation systems, and navigation computer components. Revenue from aviation inertial navigation products declined slightly in the first half of the year, mainly due to the concentration of order delivery in the second half of the year. However, navigation computer components increased by 5.8813 million yuan over the same period last year, an increase of 33.18% over the same period last year, mainly because the price of a certain type of computer product has been approved, and the original settlement price was lower than the batch price. Revenue for the difference was confirmed in the first half of the year. At the same time, the modification of certain types of computer components passed product acceptance, and revenue was confirmed in this period. We believe that the factors that affected the decline in the overall revenue of the company's aviation inertial products business in the first half of the year were normal and temporary. Performance is expected to improve in the second half of the year as revenue is confirmed with the delivery of ongoing orders. However, in the product structure, the high-end laser quick link inertial integrated navigation system will continue to be the company's key product for development, while laser inertial guidance products are the most difficult and barrier products among various types of inertial guidance products, which will further improve the company's product structure and enhance profitability. In addition, navigation computer components are the most important carriers of the company's navigation core technology. As they continue to be accepted and delivered, they will enhance the company's core technical advantages and are expected to bring new performance increases to the company. 3. Contract orders for aero engine electronics increased in the first half of the year, and the number of newly developed flight control computers increased. The company's aero engine electronics products mainly include aero engine parameter collectors and aero engine electronic control systems. The aero-engine electronics business grew significantly in the first half of the year, achieving revenue of 19.0604 million yuan, an increase of 120.67% over the previous year, mainly because in 2017, the company received a large number of contract orders for aero-engine electronics products, and delivered them to customers as scheduled and passed inspection according to the order delivery schedule. At the same time, the number of flight control computers in aero-engine electronic products rose in 2017, and the sales price of this product was higher than that of other types of aero-engine electronic products. We believe that the flight control computer is the company's new research product in 2016. With the increase in volume and the continuous development and production of new aero-engine electronics products in the future, the aero-engine electronics business is expected to usher in rapid growth and become the main growth point for the company's performance in the future. 4. Investment suggestions: We believe that the company's aeronautical inertial navigation product structure will continue to be optimized to continuously improve profitability. At the same time, as the number of newly developed flight control computers rises and subsequent research and production of new aero-engine electronics products continues to advance, the aero-engine electronics business is expected to become the main growth point for the company's performance in the future. 5. Risk warning: New product development falls short of expectations; delivery progress of aeronautical inertial guidance systems and aero engine electronics falls short of expectations; in December, the ban on the sale of shares restricted to original shareholders was lifted.