Incident: The company released its 2018 semi-annual report. In 2018, H1 achieved operating income of 2,408 billion yuan, a year-on-year increase of 278.34%; net profit attributable to the parent company was 180 million yuan, a sharp increase of 258.40% over the previous year; and basic earnings per share were 0.24 yuan. Comment: Ad hoc network orders have exploded, and the channel integration business is a major growth point in the company's recent performance. In the first half of the year, the integrated communication business achieved revenue of 1,620 billion yuan, accounting for 67.29% of total revenue, and contributed 568 million yuan in 2017; gross profit margin of 10.73%, down from 13.83% for the full year of 2017; and achieved gross profit of 174 million yuan, accounting for 32.74% of the company's total gross profit. The integrated communication business segment is mainly an ad hoc network business that was added in 2017. In 2017, the company signed more than 2 billion yuan of self-organizing network business orders, and more than 2.5 billion yuan in the first half of 2018. The gradual implementation of orders will bring about an increase in the company's performance. Ad hoc network products can be widely used in military, public safety, emergency dispatch and other fields. Currently, the market is exploding. We expect the company's ad hoc network orders to maintain a good growth trend in the next few years. At the same time, the company is expected to expand integrated products with high added value and continue to raise the level of sector revenue and gross margin. Strengthening the competitive advantage of Beidou's high-precision business, with a sharp year-on-year increase of 62.18% in the first half of the year. In the first half of the year, the company's Beidou high-precision business achieved revenue of 440 million yuan, an increase of 62.18% over the previous year. In terms of measurement, surveying and mapping, the company launched a next-generation measurement RTK product, G970IIRTK, in the first half of the year, leveraging its product advantages, and through multi-brand and multi-channel market expansion such as Guangzhou Stolley, Stonex, UniStrong, and Su Yiguang, revenue increased 61.67% year over year; in terms of high-precision boards and antennas, the good performance of high-precision terminals effectively led the high-precision board card and antenna business to achieve rapid growth, and revenue increased 229.43% year on year; in terms of precision agriculture, the company launched the EAS100 electric steering wheel autonomous driving system for agricultural machinery. Breakthroughs have been made in autonomous driving equipment for precision agriculture, and product development cooperation has been carried out with domestic manufacturers such as “Yituo”, “Dongfeng”, and “Zhonglian Heavy Industry”, as well as many well-known overseas tractor manufacturers, laying the foundation for the future explosion of the precision agriculture front equipment market. Revenue increased by 43.56% in the first half of the year. In addition, the company has made good progress in the field of high-precision digital construction machinery control, which is the key layout of the company. We believe that at present, China's high-precision satellite navigation services are still in the market introduction stage, and there is huge room for future development after market conditions are ripe. The company lays out Beidou's entire industrial chain with high precision, and actively expands multiple downstream application markets to provide long-term growth impetus for the company's future development. Fewer revenue confirmations from the Hetian project led to a decline in mobile internet business revenue in the first half of the year, and we are still optimistic about business development in fields such as public security in the long term. In the first half of the year, the company's Beidou mobile internet business achieved revenue of 172 million yuan, a year-on-year decrease of 9.36%. The main reason was that the public security Hetian project confirmed less revenue in the first half of the year. The company's Beidou mobile internet business is in a stage of rapid development in the field of public security. It mainly uses integrated police platforms and synthetic combat business systems, and strengthens applications and market development in smart cities and security with Beidou spatio-temporal information as the core (Xueliang Project, etc.). In 2017, the company signed the 1.16 billion yuan “Xueliang Project” PPP and EPC project in Xinjiang, which will gradually contribute to performance. China's public security informatization is growing rapidly, and the company's “cloud+terminal” solutions have outstanding advantages. We are optimistic about the company's business development prospects in the field of public security. The company strengthened its layout in the fields of civil aviation and general aviation, and covered various industries such as electricity, finance, land, and urban management. In the long run, the mobile internet business also has momentum for long-term growth. The cost of the three fees has risen, and the comprehensive gross margin has declined due to the growth of integrated communication services. In the first half of the year, the company's total expenses for the period were 402 million yuan, up 52.79% year on year. Among them: management expenses increased by 30.24% year on year to 249 million yuan, mainly due to the company's strengthening of internal management systems and rising human resources and consulting management expenses; financial expenses increased sharply by 527.17% year on year to 84 million yuan; sales expenses increased 17.9% year on year to 70 million yuan. In the first half of the year, the company's comprehensive gross margin was 22.06%, down 25.39 percentage points from the previous year, mainly due to the low gross margin of the integrated communication business (10.73%) and a sharp increase in revenue share. The gross profit margin of the company's high-precision business was 48.05%, up 2.85 percentage points from the previous year; the gross margin of the Beidou mobile Internet business fell back to 41.58%, down 6.14 percentage points from the previous year. Profit forecasts and ratings. The execution of the company's ad hoc network order and public security business expansion have led to rapid growth in short-term performance, continuous strengthening of core technical capabilities, and the multi-field layout of Beidou's high-precision business will drive long-term growth. We are optimistic about the company's future development prospects. We expect the company's net profit from 2018 to 2020 to be 434 million yuan, 584 million yuan, and 742 million yuan respectively, and EPS of 0.58 yuan, 0.79 yuan, and 1.00 yuan respectively. The PE corresponding to the current stock price is 29 times, 22 times, and 17 times, respectively, maintaining a “buy” investment rating. Risk warning: Autonomous network business continuity falls short of expectations, market demand in public security and other fields falls short of expectations; high-precision market maturity falls short of expectations.