Event: The company announced its 2018 interim report, achieving operating income of 2,333 million yuan, an increase of 14.37%; net profit attributable to listed companies of 350 million yuan, an increase of 24.62% over the previous year; and net profit of 285 million yuan after deducting non-net profit, an increase of 29.37% over the previous year. Comment: 1. The performance is slightly lower than the company's previous performance forecast. The company also expects net profit of 425-552 million yuan from January to September. The performance for the first half of the year was mainly affected by the ZTE incident and the operator's fiber-optic cable execution progress. It is expected that Q4 will begin to recover. From a medium- to long-term perspective, the company's 5G optical communication+security strategy is progressing comprehensively. With the advent of 5G, the company will gradually break out of the medium to long-term bottom. 2. The performance of fiber-optic cable business and Internet security was relatively good during the reporting period. Revenue increased by 30.57% and 67.32%, respectively, year-on-year. The first batch of 300 tons of the company's own optical bars has been fully produced, and optical fiber production capacity has been greatly released. Baizhuo Network's Internet security business has maintained rapid growth, and it is worth looking forward to an increase in market share in network visualization in the future; communication equipment, traffic, and data marketing declined by 29.36% and 24.61% year-on-year respectively. Both accounted for 15.8% of revenue, and the impact was relatively limited. Among them, the equipment business is affected by changes in mobile ODN procurement, and Ruiyi Information's traffic business is affected by operators' unlimited traffic packages. We expect new marketing services to be monetized in the future. 3. The gross margin of optical fiber cables increased sharply by 7.36% year-on-year to 32.89%, mainly due to the increase in the supply of self-produced optical bars and the rise in optical fiber prices. The gross margin is expected to increase further in the future, and the profit elasticity of the optical fiber cable business is huge. Judging from the three expense ratios, sales expenses, management expenses, and financial expenses accounted for 4.28%, 7.49%, and 4.16%, respectively, down 0.25%, 0.02%, and -1.12% from the previous year, respectively. Overall, it was relatively stable. 4. The strategy focuses on 5G optical communication and security, and the development path is more clear. The company previously divested micro-energy technology. Mainly, after new executives took office, the company began to focus on the two major directions of 5G optical communication and security, and the company's future strategic development path became more clear. In 2017, the company began to set up new management teams one after another to enhance the company's long-term competitiveness from a management level. The new chairman Yan Yongqing, and executives Cai Wenjie and Chen Haibin have rich industry experience and resources in the field of operators and equipment vendors, and will lead the company back to a growth channel in the field of 5G optical communication and security. The company's current strategy is divided into two major parts: 1. The optical communication sector: mainly includes optical fiber, ODN equipment, and SDN equipment. In addition, the company plans to further expand into the field of communication equipment in the future, and the company's strength in the field of optical communication is expected to be further strengthened; 2. Security sector: Baizhuo Network provides solutions for the communications industry, government, and enterprises, where network visualization market share is expected to increase. 5. Profit forecast and valuation: Due to the impact of the operator's optical cable execution progress, we lowered the company's 2018-2020 EPS from 0.79, 1.10 yuan, and 1.45 to 0.67, 0.92 and 1.35 yuan. As 5G approaches, companies are optimistic in the medium to long term to focus on 5G optical communication and security strategies and maintain “buy” ratings. Risk warning: operator demand falls short of expectations; acquisition performance falls short of promises;