1. Event Overview The company released its 2018 semi-annual report: it achieved revenue of 2,333 billion yuan, an increase of 14.37% over the previous year; net profit of the mother was 350 million yuan, an increase of 24.62% over the previous year. 2. Analysis and judgment of the release of optical rod production capacity, and steady improvement in performance. In the first half of 2018, the company focused on the main fiber optic cable business. Revenue increased by 30.57% year on year, gross margin reached 32.89%, and increased 7.36pct year on year. The production process of the fully synthetic optical fiber prefabricated rod independently developed by the company is fully mature. The company's first 300-ton optical fiber prefabricated rod project reached production in 2017, and the second phase of the 300-ton production expansion project entered the trial production stage in June 2018, and production will be completed soon. At the same time, cooperative relationships with external strategic partners have been further consolidated and strengthened, and the ability to obtain the supply of high-quality and inexpensive optical fiber prefabricated bars from outside has been further enhanced. With the resolution and further release of the company's light bar production capacity problem, the company's competitiveness in the industry is expected to continue to increase. Develop new products and improve production efficiency Cybersecurity grew rapidly in the first half of the year. The company's cybersecurity revenue reached 189 million yuan, an increase of 53.4% over the previous year. Baizhuo Network, a subsidiary of the company, has been focusing on large security business areas for many years. Since 2005, after more than 10 years of continuous R&D and customer service, the technical level of security services such as network visualization has reached the leading level in the country. During the reporting period, Baizhuo Network continued to improve the technical level of network visualization products through continuous research and development, actively developed next-generation high-performance network visualization products, and continuously expanded the market scope of network visualization products. At the same time, we will continue to actively lay out and expand new business areas, strengthen public safety and urban safety business capabilities to serve government departments, and promote the implementation and delivery of related projects. Sword refers to 5G, increasing layout, and companies are continuously promoting R&D, industrial layout, and market expansion of optical communication equipment such as ODN and SDN, and pointing to new opportunities for 5G development. In the first half of the year, the company's communication equipment achieved revenue of 222 million yuan. In the future, the company will further research and develop communication equipment products and solutions covering the fields of wireless, transmission and access, enhance the company's technical capabilities, and enrich the company's optical communication solutions. 3. Profit forecasts and investment recommendations expect the EPS in 2018-2020 to be 0.62, 0.77 and 0.97 yuan respectively, and the corresponding PE of 16, 13, and 11 times, respectively. The company's minimum PE value and average value in the past three years were 18 times and 55 times, respectively. Maintain a “Recommended” rating. 4. Risk warning: Optical rod production capacity expansion falls short of expectations; cybersecurity business development falls short of expectations.