Events: Performance increased by 86.52% year on year, and R&D investment continued to be strengthened 1) The company achieved operating income of 576 million yuan in 2018, an increase of 41.99%; net profit of 66 million yuan, an increase of 86.52% over the previous year; basic earnings per share were 0.1157 yuan, up 86.61% year on year, and performance was in line with expectations. Net profit is expected to vary between 67.206 million yuan and 91.6372 million yuan from January to September 2018, an increase of 10% to 50% over the previous year. 2) The company's 2018 H1 management expense ratio was 9.22%, an increase of 1.43 pct over the same period last year. The main reason was the sharp increase in employee remuneration and R&D investment; R&D investment was 14.1 million yuan, a sharp increase of 134.5% over the previous year. The smart marketing business is growing steadily, and technology investment and business collaboration are expected to enhance competitiveness 1) The company's 2018 H1 smart marketing service revenue was 225 million yuan, an increase of 4.45% over the previous year, accounting for 40.59% of revenue. 2) The company continues to increase R&D investment around the theme of smart marketing, and has developed a “mobile CRM system” smart marketing solution based on existing business - a smart marketing “radar” platform to improve the accuracy and efficiency of advertising. 3) The company initiated internal integration of the smart marketing sector and business collaboration with invested enterprises, and initiated strategic cooperation with Six-Deren in the field of smart hardware business. Six-Deren is a leading SaaS SCRM enterprise. Cooperation between the two sides is expected to incubate and market SaaS products and enhance precision marketing capabilities. The smart hardware business grew brilliantly, and the investment layout penetrated high-growth segments 1) Benefiting from the lighting export business and the development of the domestic independent chip industry, the company's smart hardware sector grew brilliantly: the revenue of the 2018H1 smart hardware sector was 325 million yuan, an increase of 87.44% over the previous year; subsidiaries increased investment in high-growth business fields such as smart lighting and smart homes, and completed a series of product development in 2017, and the 18H1 market was well received. 2) In addition, in early 2014, the company reached a close business cooperation with ASM PT China Manufacturing Center, an equipment supplier for multinational chip manufacturers, and business revenue from ASM PT increased by 159.45% year-on-year; the two sides will also deepen cooperation in the field of intelligent manufacturing in the future, which will also inject momentum into the smart hardware business of McDonald's. 3) The company invested in the establishment of Yiming Optoelectronics and Jiangsu Shiyida in 2018H1, which are dedicated to the layout and development of the international lighting market and the smart lighting market in the domestic new retail sector; increasing capital in the Singaporean enterprise THINGS SMART PTE.LTD (Easy Smart PTE.LTD), focusing on the R&D, design and marketing of smart locks; the company's investment layout in the smart hardware segment helped develop in the high-growth segment of the company's “smart hardware” sector. Profit forecast and investment recommendations We expect the company's fully diluted EPS in 18/19/20 to be 0.23/0.34/0.49, respectively. The current stock price corresponds to 34/23/16 times PE in the same period, maintaining the “increase in holdings” rating. Risk warning: risk of merger and acquisition integration, risk of impairment of goodwill, risk of increased market competition, etc.