Beijing Hengtai Shida Technology Co., Ltd. is a leading provider and operator of intelligent big data integrated solutions in China. In recent years of development, revenue has continued to rise, and net profit has remained stable. In 2018, the company strengthened the company's communications sector business on the basis of its original business through the acquisition of Liaoning Post and Telecommunication Planning and Design Institute Co., Ltd. (Liaoning Post and Telecommunication). In the future, Hengtai Shida has achieved a business layout in the two sectors of intelligent big data and communication transmission, which can provide richer services to customers in different industries. ① In the intelligent big data sector, the company provides comprehensive intelligent big data solutions to the power industry based on the business conditions of existing listed companies, and continues to expand new industry customers. ② In the communication transmission sector, the company realized the communication network design service business and the layout of carrier communication chips through its two subsidiaries, Liaoning Post and Telecommunication and Future Worry-Free. Communication and transmission sector business introduction China's 5G network is expected to be commercialized on a large scale in 2020. As a guide for network construction, the communications planning and design industry is expected to see an acceleration in growth from 2019. The scale of investment in 5G network construction in China is generally expected to increase 1.5 to 3 times compared to 4G. However, at present, site planning is already in sight. In July 2017, the 14 provinces of Shanxi, Heilongjiang, Jiangxi, Shandong, Hubei, Hainan, Shaanxi, Gansu, Qinghai, Guangxi, Hebei, Henan, Chongqing, and Liaoning made it clear that the Tower Company will coordinate and organize 5G site planning. Seven provinces, Shandong, Heilongjiang, Henan, Guangxi, Hainan, Shaanxi, and Liaoning, have issued documents stating that they will open up the province's public resources to the Tower Company and support the construction of information infrastructure. Liaoning has become one of the provinces with strong policy support for 5G construction. The main business of post and telecommunications in Liaoning can be divided into two parts: communication network design services and system integration. The business mainly targets the three major domestic telecom operators, tower companies, power grid companies, or government enterprises and institutions. Liaoning Post and Telecommunication promised to deduct non-net profit from 2016 to 2018 of 105 million yuan, 120 million yuan, and 137 million yuan, respectively. 50% of the excess amount is used to reward the Liaoning Post and Telecommunication Management Team. In 2017, the company achieved net profit of 131 million yuan. After this acquisition, there were significant changes on the asset side and debt side of the listed company, and the overall debt ratio declined. The changes reflect the settlement characteristics of downstream post and telecommunications operators in Liaoning, and accounts receivable have increased dramatically. Inventory has also increased in scale and is expected to be an integrated business product. Improvement of fixed assets and intangible assets. Goodwill is 1,359 billion yuan. Through the integration of the two companies, the synergy effect is reflected in the following three points: ① Business integration: Hengtai Shida mainly provides information technology services to power grid enterprises, and Liaoning Post and Telecom mainly provides communication network technology services such as communication design, technical consultation, technology development services, and communication information system integration to domestic communication operators, tower companies, power grid companies, or government, enterprises and institutions. The two companies have a synergistic effect on grid customers. Listed companies have enhanced their communication network design capabilities, intelligent building design capabilities, and engineering contracting capabilities through acquisitions. Cooperation between the two can improve the level of profitability in serving power grid customers. ② Regional integration: Hengtai Shida's sales channels are mainly concentrated in North China, Northwest China, Southwest China and East China, while the sales channels of Liaoning Post and Telecom are mainly concentrated in Northeast China, Central China, East China and South China. In addition to the situation where the listed company and Liaoning Post and Telecom have overlapping service outlets in Liaoning, Xinjiang, and Beijing, the business areas of the two companies are basically complementary. After the acquisition is completed, they can jointly cover most provinces in the country, efficiently expanding customer coverage capabilities. ③ Supply chain integration: As the scale of the integrated business of Liaoning Post and Telecommunications increases, procurement demand increases. Through cooperation, the two companies can share and collaborate in procurement channels, which can reduce procurement costs. Furthermore, in addition to the increase in market size on the operator side, 5G applications in the power industry have also received attention. On September 14, 2017, China Telecom Beijing Research Institute, China Electric Power Research Institute, and Huawei jointly launched the “5G Power Slicing Foundation Foresight Joint Innovation Project”. This is a major national science and technology project in 2017 and a major forward-looking research topic on national grid infrastructure. Preliminary commercial use of 5G power slicing is expected in 2019. The power industry is seeking to build a full-coverage optical network and wireless coverage in the 5G era to meet the control, monitoring, and communication needs of the power industry from the power generation end to the power consumption end. The next generation of power grids requires real-time data transmission, business isolation, and smart operation requirements. It poses new challenges to the network, and requires the support of 5G IoT slicing and high-speed communication slicing. The acquisition will help listed companies enhance their grid-oriented communication service capabilities and enhance the company's profitability. The company's holding subsidiaries have worry-free prospects to provide customers with integrated data collection and communication services through carrier communication chip technology, which is the company's layout in the big data transmission process. Currently, the main business is concentrated in the field of electricity consumption information collection in the power industry, and it will face major market opportunities for upgrading from narrowband carriers to broadband carriers. Furthermore, the technology will be extended to the municipal sector through a multi-meter integrated solution. On July 16, 2018, the company announced that its products, communication unit chips (single-phase/HPLC), communication unit chips (three-phase/HPLC), and local communication unit chips (concentrator type I/HPLC), have recently passed the State Grid Measurement Center Co., Ltd. communication unit chip (HPLC) level interconnection test and obtained inspection reports. Earlier, Neusoft Carrier announced the connectivity results. The company became one of the two A-share companies that passed the connectivity test. Other companies that passed the test include Huawei Hisilicon, etc. Intelligent big data sector business introduction The company's big data business mainly revolves around the design and integration of big data visualization. Big data visualization is the last kilometer of the big data industry chain. It can help decision makers make business intelligence, government decisions, public services, marketing, etc. based on data. The data scale of the power grid industry can reach PB level or above. Faced with such large-scale data, the power grid's large-screen visualization business has been ahead of other industries in recent years. According to third-party assessments, the global big data market was 25.67 billion US dollars in 2015. It is estimated that the market size will reach 72,038 billion US dollars in 2022, and the market size will reach more than 100 billion US dollars in 2025. The compound growth rate of the industry is around 15%. As a listed company, Hengtai Shida has a high advantage in talent reserves and solution reserves. Relying on the company's many years of experience in the power industry, the company's products have now achieved cross-industry transformation. In recent years, it has expanded a series of customers in various industries, including meteorology, civil aviation, subways, and public security. As the number and scale of customers expand, the company's intelligent big data sector has opportunities for further growth. Investment advice and ratings Hengtai Shida targets the intelligent big data business. It has expanded into different industries in recent years, and there is room for further growth along with the development of the big data industry. Furthermore, the company's subsidiaries have a worry-free layout of broadband carrier chip & module products. Currently, they have obtained the State Grid interconnection certification. As the collection of broadband electricity meters begins, there is a possibility that the company's products will be released. The company recently acquired Liaoning Post and Telecom. As the first-tier private design institute for network design planning in the 5G era, the company will benefit from the explosion of business in the 5G era. Furthermore, after this acquisition, the listed company and Liaoning Post and Telecommunication have complementarity in areas such as regional business expansion and power sector business development. In the future, they will form synergies and promote mutual business development. We expect the company's performance from 2018 to 2020 to be 187 million (exam preparation), 239 million, and 305 million respectively, corresponding to PE 25X, 20X, and 15X. Risk warning: 1. The risk that 5G development falls short of expectations or that the expansion of the post and telecommunications region in Liaoning is blocked, and that the expansion of the post and telecommunications region in Liaoning is blocked; 2. The risk that gross margin will decline due to intense competition in the big data business; 3. The risk that the company's business integration will fall short of expectations; 4. The risk that operators' operating expenses will decline and competition in the general service industry will further intensify.