Key investment events: The company released its 2018 interim report. During the reporting period, the company achieved total operating income of 2,556,620,670.38 yuan, an increase of 2.75% over the same period last year; net profit attributable to shareholders of listed companies was 97,539,537.63 yuan, an increase of -7.92% over the same period last year. The 5G network testing and commercialization process is accelerating, and the optical communication industry is still in a boom cycle: 1. Support for the 5G industry continues to expand, and related policies are continuously being strengthened. From the top down, China continues to improve the importance of key core technological innovation capabilities, and the 5G network testing and commercialization process continues to accelerate. 2. In recent years, under the continuous impetus of a series of policies such as “Broadband China” and “Internet+Advanced Manufacturing”, benefiting from the rapid market development trend brought about by future 5G intensive networking connections and the surge in IoT traffic, communication infrastructure construction and upgrading have continued to increase, and the optical communication industry is in a boom cycle of development. 3. Despite the impact of trade frictions between China and the US and the ZTE incident, operating pressure and competition in the communications industry have increased, and the supply of raw materials such as upstream optical bars, optical fibers, and electronic basic components continues to be tight, the company has vigorously expanded its non-fiber cable business and overseas market business and maintained stable performance. Responding positively to the ZTE incident, the number of Tefa Dongzhi contracts remained stable: after the ZTE incident in the first half of the year, the company actively strengthened the expansion and maintenance of new and old customers to quickly enrich the efficiency of production capacity. At the same time, we are actively developing new products such as smartwatches to develop new incremental business. In the first half of 2018, the number of contracts completed by Tefa Dongzhi was basically the same as the same period last year. The company achieved revenue of 2,557 billion yuan, an increase of 2.75% over the previous year. Due to rising prices of upstream raw materials, the company's net profit was 114 million yuan, a year-on-year decrease of 8.26%. With the resumption of ZTE's business, it is expected that the company's operating income will continue to improve. Chengdu Fourier is actively expanding into new markets, and the second half of the year will usher in a major breakthrough: Chengdu Fourier has adopted a number of measures to broaden market information channels and optimize the business direction structure. New breakthroughs have been made in markets such as military ancillary services, integrated monitoring and control services, and satellite communication services. As Chengdu Fourier adjusts its management structure to expand the market, insists on leveraging the advantages of independent research and development of core technologies, and strengthens consultancy cooperation, it is expected that most development projects will be delivered in the second half of the year, which will greatly support the company's performance in the second half of the year. Merger and acquisition of excellent targets for military computers will further strengthen military informatization business: in July 2018, the company plans to acquire 70% of the shares of Beijing Shenzhou Flight Technology Co., Ltd. in cash. Shenzhou Aviation has comprehensive technical capabilities and product systems, and is an excellent target in the field of military computers. It is expected that the joint efforts of Chengdu Fourier will enhance the scale and competitiveness of the military business. The transferee of Shenzhou Aviation promised that the non-net profit deducted from 2018 to 2020 will not be less than 30 million yuan, 40 million yuan, and 50 million yuan respectively. A total increase of 120 million dollars in profit over three years can significantly increase the company's profit level. Profit forecast and investment rating: We believe the company's various businesses will continue to develop at the pace of the first half of the year in the second half of the year. The company's EPS for 2018-2020 is expected to be 0.48 yuan, 0.62 yuan, and 0.78 yuan, corresponding to PE 16/12/10 X, giving it a “buy” rating. Risk warning: Dongzhi Technology's foundry business faces the risk of a decline in gross margin due to intense competition, and the risk of a rapid increase in accounts receivable