Event: The company released its 2018 annual report, achieving full-year revenue of 2,038 billion yuan, an increase of 26.41% over the previous year; net profit of 314 million yuan, an increase of 26.05% over the previous year, and net profit of 292 million yuan after deducting non-recurring profit and loss, an increase of 29.53% over the previous year. The two main businesses grew rapidly, and gross margin declined: during the reporting period, the company's two main businesses, fintech services and smart terminal informatization, achieved revenue of 1,322 billion yuan and 298 million yuan respectively, up 25.39% and 45.10% year-on-year. Among them, fintech services have benefited from small and medium-sized banks increasing the construction of their own IT systems to achieve better development. In addition to this, the company introduced its strategic partner Ant Financial in 2018 to achieve the exchange of channels and technical resources between the two parties, and jointly develop a “next-generation distributed financial core system”. On the other hand, the company's smart terminal informatization business has been comprehensively digitally upgraded in the direction of the intelligent Internet of Things, building a full-stack intelligent IoT capability chain. The business already initially has comprehensive intelligent IoT solutions and comprehensive service capabilities integrating software and hardware from chips to applications. The gross margins of the two main businesses both declined in 2018, by 2.46 and 1.67 percentage points, respectively. The proportion of capitalized expenditure increased, and the cash flow situation was good: during the reporting period, the company's sales expenses and management expenses increased by 44.93% and 25.29%, respectively. In terms of R&D expenses, the company's R&D expenses accounted for 14.75% of sales revenue in 2018, an increase of 2.73 percentage points compared to 2017. On the other hand, with the development progress of next-generation distributed financial core systems reaching 60%, the company's capitalized R&D expenditure has further increased, accounting for 21.70% of current net profit, an increase of 14.72 percentage points over 2017. On the other hand, in 2018, the company's net operating cash flow was 275 million yuan, which accounted for 87.56% of net profit from the company's operating business. The repayment situation of the company's operating business was good. The small and medium-sized banking market is expected to further open up, benefiting fintech business: On March 5, 2019, Premier **** clearly stated in the “2019 Report on the Work of the State Council Government” that financial supply-side reforms should be deepened. The report mentioned specific measures to increase credit support for small and medium-sized enterprises, such as “increasing targeted downgrading of small and medium-sized banks and freeing up capital for private and small and micro enterprise loans” to increase credit support for small and micro enterprises. As the financial institutions closest to small and micro enterprises, the ability of small to medium banks to export their business is expected to receive further policy support, thus driving their investment in upgrading their own IT systems. The company's fintech service business mainly targets small and medium-sized banks, including third-party testing, core system-based business solutions, and technology operation services, covering the entire life cycle of small and medium-sized banks. With the improvement of the business capabilities of small and medium-sized banks, the company's fintech service business is expected to be further developed. Investment advice: The company is deeply involved in the financial sector and has joined forces with Ant Financial to deepen cooperation in the banking information technology market. In addition, businesses such as the Internet of Things and chips have a good development trend. The EPS for 2019-2020 is expected to be 0.49 yuan and 0.63 yuan respectively, maintaining the “buy-A” rating, and the target price for 6 months is 16 yuan. Risk warning: The cooperation with Ant Financial fell short of expectations, and the development of the IoT business fell short of expectations.