Event: The company released the 2018 semi-annual performance report. In 2018, H1 achieved revenue of 376 million yuan, an increase of 15.68% over the previous year; net profit attributable to shareholders of listed companies of 59 million yuan, an increase of 7.53% over the previous year; and basic earnings per share of 0.09 yuan. Comment: All business segments made concerted efforts, and performance increased steadily in the first half of the year. The company's performance in the first half of the year continued to grow, and the operating conditions in all business segments improved. The aerospace electronics business achieved revenue of 65 million yuan, an increase of 49.72% over the previous year, and the product gross margin decreased slightly by 1.43 pct to 51.50%, and remained at a high level. SoC chip products and system integration products achieved significant revenue growth. Revenue was 23 million yuan and 28 million yuan respectively, with year-on-year increases of 143.90% and 122.31%. Huiyu's intelligent surveying and mapping business continued to grow strongly. In the first half of the year, it achieved revenue of 119 million yuan, a year-on-year increase of 36.47%, and product gross margin of 45.43%, which remained stable. The performance of Boya's security business and data center construction and operation services is relatively stable. With the gradual implementation of subsequent projects, the profit level is expected to increase in the second half of the year. The satellite big data business added a new business disclosure project in the first half of the year. In the first half of the year, the business achieved revenue of 2.47 million, with a gross margin of 59.98%. Currently, there are plenty of orders for the company's satellite big data business, which is expected to be released in the second half of the year. In the first half of the year, the company's three-fee rate was 21.9%, an increase of 2.7pct over the previous year. Among them, sales expenses were 65 million yuan, up 40.93% year on year, mainly due to increased salaries of sales staff at subsidiaries Boya and Huiyu; management expenses were 65 million yuan, up 26.35% year on year, mainly due to depreciation expenses for the company's fixed assets, R&D expenses, and increased management expenses for new subsidiaries; and financial expenses of 4.14 million yuan, a sharp increase of 177.52% over the previous year, mainly due to increased bank loans and corresponding increases in interest expenses. The company's current gross sales margin was 41.13%, up 1.17pct year on year; net sales profit margin was 15.71%, down 1.24pct year on year; RoE was down 0.88pct year on year. Promote the upgrading of aerospace electronics products and consolidate the competitiveness of core technologies. The rapid development of China's aerospace industry places higher demands on the core components of autonomous and controllable aerospace, and the company continues to strengthen technology accumulation in its traditional dominant aerospace electronics business. In the first half of the year, the company's aerospace electronics SOC/SIP/EMBC side continued to promote product upgrades, continuously expand market share, improve product lines, and achieved certain results: the Aerospace Institute's SOC chip project has entered the back-end design stage; the IP core project and wave controller project have been delivered; the SIP business has successfully delivered a number of OBC modules; the EMBC business continues to use 1553B test equipment and customized computer boards as the main R&D line, actively expanding new product types such as TTE and FC. The revenue of the aerospace electronics business was 65 million yuan, a significant increase of 106.19% over the same period last year, accounting for 17% of total revenue. The recovery of the aerospace electronics business was mainly due to an increase in satellite launch missions in the first half of the year, which boosted the company's orders for core electronic components and reflected the company's deep heritage in the field of aerospace electronic components. We believe that under the catalyst of the Sino-US trade war and other related events, China's domestically produced autonomous controllable chips will enter the fast track of development. The company has technical advantages in space-grade chips. As the company's products continue to be upgraded, the dominant position in the industry will become more prominent, and the future will fully benefit from the autonomous controllability of China's domestic chips and the opportunities for accelerated development of the aerospace industry. Accelerate construction of the “Zhuhai-1” constellation and actively expand downstream applications of satellite data. In the first half of the year, the company's “Zhuhai-1” constellation 02 satellite was successfully launched, and successfully networked with 2 video satellites of Group 01 launched in orbit last year, greatly improving the constellation's ability to collect remote sensing data. The development mission for the company's 03 group of 5 satellites has begun. Currently, it is progressing smoothly, and coordination of the launch of this batch of satellites has begun. In addition, the construction of the Heilongjiang Mohe Ground Station was completed and put into use, and the Zhuhai ground station enhanced its data reception capacity and added 1 additional antenna. Application aspect. In the first half of the year, the company has carried out pilot hyperspectral applications in projects such as reservoir water quality monitoring and marine aquaculture, and completed a number of advanced data product development, thematic map production, and technical support plan preparation. In addition, several domestic and overseas data agents have been developed, laying a solid foundation for subsequent satellite data marketing work. The company achieved revenue of 145 million yuan in the satellite remote sensing and big data business, an increase of 26.75% over the same period last year, and revenue growth was relatively stable. Among them, satellite big data services have just been put into use. Currently, they only account for 1.7% of satellite remote sensing and big data revenue, so there is huge room for future growth. The gross margin of satellite big data services is close to 60%, which is far higher than remote sensing, monitoring and control and data center construction. The increase in sales volume of this service will contribute positively to the company's overall gross margin. The company raised 1,082 million yuan to provide a solid guarantee for the smooth development of satellite big data services and the implementation of medium- to long-term strategic plans. As the company's remote sensing satellites are gradually networked and the service capabilities for commercial satellite big data applications continue to improve, we are optimistic about the future application prospects of satellite big data services in fields such as civil-military integration, smart cities, and land resources. Accelerating the AI business layout is expected to form a synergistic effect with existing businesses. In the first half of the year, the company carried out extensive preliminary research work on AI chips, communicated market needs with artificial intelligence research and application units related to aerospace systems, and at the same time stepped up research and development work on AI chips/modules. The company's layout of artificial intelligence will form a synergistic effect with existing businesses, and has broad application prospects in fields such as satellite big data processing, security, and aerospace electronics chips. We believe that relying on its multiple technical advantages to lay out AI chips/modules and other fields will help the company seize AI development opportunities and broaden the company's potential profit growth points in the future. The subsidiary's operations are improving, and it is proposed to acquire assets to strengthen the geographical information industry layout. In the first half of the year, the business conditions of the subsidiaries Boya Information, Huiyu Company, and Zhijian Electronics improved, and the security and surveying businesses all maintained a good growth momentum. In August, Boya completed a horizontal acquisition of more than 100% of Guangzhou's shares, enhancing the company's competitiveness in the security market and increasing the market share and profitability of the security business. The company plans to issue shares to purchase all or part of the shares of Baixin Blueprint and Zhejiang Hexin. This acquisition is conducive to integrating the advantages and resources of all parties involved in the transaction, further promoting the company's layout in the geographic information industry and satellite big data business, giving full play to the synergistic effects of all parties involved in the transaction in technology, business and market, and enhancing the company's overall strength and influence within the industry. Earnings forecasts and ratings. Driven by policies and order demand, the company's overall performance will continue to grow steadily, and the company's aerospace electronics and satellite big data business will bring significant benefits. We are firmly optimistic about the company's future development prospects. We expect the company's operating income from 2018 to 2020 to be 1,219 billion yuan, 1,628 billion yuan, and 2.116 billion yuan respectively; net profit attributable to the parent company from 2018 to 2020 is 198 million yuan, 265 million yuan, 352 million yuan respectively; EPS is 0.28 yuan, 0.38 yuan, and 0.5 billion yuan respectively. The PE corresponding to the current stock price is 37 times, 28 times and 21 times, respectively, maintaining a “buy” investment rating. Risk warning: Aerospace electronics orders fall short of expectations; satellite big data business is not progressing smoothly