Matters: Earlier, company leaders attended the Guoxin Securities TMT Listed Company Exchange Summit and fully communicated and exchanged views on industrial development and the company's business layout. Relevant minutes are attached later. Comment: The base station structure has changed in the 5G era, driving the development of RF devices towards miniaturization and integration. Distributed base station equipment in the 3/4G period consists of three parts: baseband processing unit (BBU, base band unit), radio frequency processing unit (RRU, Remote RadioUnit), and antenna feed system. The BBU is centrally located in the computer room and is mainly responsible for completing functions such as baseband signal processing, transmission, master control, and clocking, and connecting the RRU to the transmission network. The RRU is connected to the antenna through a feeder, and the BBU is connected to the BBU through optical fiber. It mainly completes transmission signal processing and reception signal processing from the base band to the air port, including important components such as transceivers (TRX), amplifiers, filters, and power supplies. An antenna is an information-energy converter between the base station equipment and the end user. It is responsible for receiving the upstream signal transmitted by the user and the downstream signal output by the transmitting base station. The changes in base station architecture in the 5G era are mainly reflected in: on the one hand, BBU is divided into a CU-DU two-level architecture. DU (Distributed) is a distribution unit that is responsible for meeting real-time requirements while also having some low-level baseband protocol processing functions. CU (CU) is the central unit responsible for non-real-time wireless high-level protocol functions; on the other hand, RRU and antenna feed systems are merged to form active antenna AAU (Active Antenna Unit). With the advent of active antennas, massive MIMO, and ultra-dense networking, devices within RF units tend to be miniaturized and integrated, and are expected to rise in volume and price. The AAU integrates the functions of the original antenna and RRU. The back of each antenna oscillator will be directly connected to a distributed micro transceiver unit (micro-radio), including functional devices such as filters, amplifiers, and duplexers. From 4G to 5G, base station antennas will gradually evolve from 2T2R, 4T4R, and 8T8R to 16T16R, 64T64R, and even 128T128R, which means that the number of antenna channels will increase, and the number of corresponding RF devices will increase exponentially. At the same time, the bandwidth of the 5G communication band has increased dramatically, the complexity of filter design has increased, and the value of a single unit will also increase significantly. The main driving forces for the evolution of key filter technology are miniaturization and weight reduction. Filters in the 5G era require improvements and upgrades compared to 4G in terms of cavity design, structural technology, and structural materials, etc., which will drive competition more intense. The reason is that the market is facing a new round of reshuffle. The reason is: miniaturization, manufacturers with dielectric filter technology have an advantage. Traditional metal filters have a relatively low entry threshold and a relatively low profit margin. Dielectric filters have a high technical threshold and a high profit margin. Weight reduction drives integration, major antenna changes, and market share is concentrated on leading companies. As 5G base station antennas will be integrated with RRU to form a new unit AAU, antenna companies' downstream customers will change from previous operators to equipment vendors. Leading antenna manufacturers with deep cooperation with equipment vendors and large technical reserves for large-scale array antennas are expected to gain more market share, while filter-type RF products need to be integrated with antenna arrays. Manufacturers with strong integrated design capabilities and deep cooperation with antenna leaders and equipment vendors will have an advantage. The company's filter products may be in the new 5G cycle, and the company's main business is the R&D, production and sales of mobile communication base station radio frequency products, smart terminal products, and auto parts products. Among them, radio frequency products for mobile communication base stations include core components of mobile communication systems such as radio frequency devices and radio frequency structural parts. The products are mainly used in the full range of mobile communication systems from 2G to 5G. The company's past history was greatly affected by the telecommunications investment cycle. The company's net profit reached 536 million yuan during the 4G peak period in 2014, and the end performance of 4G in 2017 was unsatisfactory, and losses were large. In the first three quarters of 2018, the company's operating income increased by 2%, and net profit attributable to shareholders of the parent company increased by 81%. By business, radio frequency products accounted for 67% in 2017, mainly including core components of mobile communication systems such as RF devices and RF structural components. The products are mainly used in 2G to 5G full range of mobile communication systems, etc., and smart terminal structural components account for 24.7%. Currently, orders from overseas customers have maintained a growing trend, delivery performance is good, and the number of new projects is growing rapidly. At the same time, several new domestic smart terminal brands have been developed, making preparations for new 5G smart terminals after 2018. The company's main customers are equipment manufacturers such as Huawei and Ericsson. The company has been a core supplier of Huawei's gold medal for many years. In 2017, the company achieved a historic breakthrough in terms of delivery and quality, and won 6 awards, including Excellent Supplier and Excellent Quality, all of which were the only winners in the RF category. Furthermore, after several years of expansion, the company's core customer Ericsson has achieved a substantial breakthrough in the filter product line and has become Ericsson's supplier of structural components and filters. The new 5G technology has also been laid out ahead of schedule. The company's self-developed dielectric resonator has been supplied to customers in large quantities. The technology and products reserved for 5G, such as miniaturized metal filters, dielectric waveguide filters, advanced MIMO filters, and high-performance ceramic materials, have gradually matured as cooperation with customers has progressed, and some products have begun to be supplied in batches. Currently, the three types of filters that have received the most attention in the industry are metal coaxial resonance filters, ceramic dielectric resonance filters, and ceramic dielectric filters. The table below is a comparative analysis of the three filter schemes. Optimistic that the company's filter business has ushered in a good opportunity for development in the 5G era, giving the company an “accumulation” rating that has been the core supplier of Huawei's gold medal for many years, has occupied a good share of the filter market in the 3/4G era, and has now become Ericsson's structural components and filter supplier. In the 5G era, base station RF filter products have a trend of miniaturization and integration. The company has strengthened technical reserves such as miniaturized metal filters, dielectric waveguide filters, etc., or ushered in a good opportunity for development. We expect the company's net profit in 2018 to be $121 million (with reference to the performance forecast) and $210/295 million for 2019/2020 respectively. Considering the exclusive use of the company's capital raised funds, after deducting the cash market value of nearly 2 billion dollars (in fact, 2.4 billion dollars and some short-term liabilities), corresponding to 33/23 times PE in 2019/2020, we give it an “increase in holdings” rating and carefully recommend it. The risk indicates that the order execution time is lower than expected; 5G progress is lower than expected;