Event: On the evening of August 16, 2018, the company released its 2018 semi-annual report. Revenue was 2,408 billion yuan, up 278.34% year on year; net profit was 180 million yuan, up 258.40% year on year; basic earnings per share of 0.2426 yuan/share, up 253.64% year on year. The interim report performance has increased dramatically, and business development continues to improve. The company's 2018 H1 net profit was 180 million yuan, up 258.40% year on year, slightly exceeding expectations; net profit from 2018Q2 was 126 million yuan, up 180% year on year and 133.33% month on month. The main drivers of performance growth are: (1) the company quickly won a large number of military ad hoc network business orders during the reporting period; (2) the high-precision business achieved rapid growth. Considering that the company's performance confirmation is mainly concentrated in Q4, performance growth for the full year of 2018 can be expected. Orders from self-organized networks are being implemented intensively, and I am optimistic about the company's ability to continuously obtain orders. As a temporary multi-hop autonomous system, wireless self-organizing networks do not rely on pre-set infrastructure. They are mainly used to solve visual command, control, and communication problems under emergency conditions, and can be widely used in military, public safety, emergency dispatch and other fields. The company's military ad hoc networking business mainly uses military ad hoc networking equipment, including portable data integrated mobile base stations and intelligent communication network data processors. In 2017, the company signed a total of 2.1 billion yuan in self-networking business orders. Up to now, the company has signed an order of 2.8 billion yuan in 2018, exceeding the number of orders received in the whole of last year. The company relies on Beidou Navigation Company and Yuanbo Zhonghe in this business, and can obtain stable contract processing orders. The large-scale growth of the company's business this year has also benefited from excellent capabilities and channels, as well as huge market demand. Considering the 30 billion yuan space in the military self-organizing network market and the company's strong ability to obtain orders, the company is expected to continue to make breakthroughs in the self-organizing network business, and is optimistic about the company's continued development in the self-organizing network business. High-precision business has huge potential, and the market is still in the blue ocean. The high-precision business is the company's business with great potential for future growth. It mainly refers to providing products for related industry applications based on high-precision positioning technology (accuracy from cm to mm). Specifically, in terms of application areas, it includes surveying and mapping, precision agriculture, and intelligent driving tests, while also expanding into emerging business fields such as mechanical control, robotics, and drones. Currently, measurement RTK products in the field of surveying and mapping are still the main ones. Currently, these businesses have all made some progress during the industry introduction period or growth period. During the reporting period, the company launched UA32 antennas supporting the L band, which enabled the company to achieve major breakthroughs in core technologies such as high-precision chips, algorithms, boards, and antennas. The company is actively exploring relevant fields and is expected to gain a first-mover advantage in related fields. According to the “National Satellite Navigation Industry Medium- and Long-Term Development Plan” issued by the General Office of the State Council, China's satellite navigation industry will reach 400 billion yuan by 2020. The contribution rate of the Beidou satellite navigation system to the domestic satellite navigation market is about 60% -80%, that is, the market size is expected to reach 2400-320 billion yuan. The company is deeply involved in high-precision business, and there is huge room for future growth. Profit forecast: We are optimistic that Hezhong Sizhuang is the leader in civilian Beidou navigation. At a time when the Beidou navigation industry is developing rapidly, the company's business performance will develop rapidly. I am optimistic about the company's continuous growth in the self-organizing network business and the broad prospects for high-precision business. We expect the company's net profit attributable to shareholders of listed companies in 2018-2020 to be 4.29, 5.65 and 712 million yuan respectively, corresponding to EPS of 0.58, 0.76 and 0.96 yuan, respectively, and current prices corresponding to 2018-2020 PE of 29.6, 22.5 and 17.9 times, respectively. For the first time, we have given a “Prudent Recommendation” rating. Risk warning: (1) self-networking business falls short of expectations; (2) high-precision business development falls short of expectations; (3) industry competition is intensifying.