Matters: 1. The company, a consortium composed of Shintetsu Operations and China Construction Company won the bid for the first phase of the Tianjin Metro Line 7 project PPP project. The total investment of the project was 27.897 billion yuan, of which the PPP project company invested about 19.681 billion yuan, and the company and Kobe Railway operations invested a total of 157 million yuan. 2. The company plans to implement a stock options incentive plan. The stock source is A share repurchase or targeted addition. The incentive targets are 262 people, including company executives and core technology/business cadres. The plan is to award 70 million shares, accounting for 2.52% of the company's total share capital. Comment: It won the bid for the Tianjin Line 7 PPP project, starting the entire subway line operation model. Full line operation is the company's new development strategy model. Approval of the urban rail industry has accelerated since the new regulation No. 52 last year. It is estimated that more than 1,000 kilometers of subway traffic will be added every year. Light rail and other multi-standard rail transit have huge potential in the future, and most cities, especially third- and fourth-tier cities, have no experience in building and operating urban rail, so professional team participation is urgently needed. The company won the bid for the Tianjin Metro Line 7 PPP project and will fully participate in the entire life cycle of the project. On the one hand, it will expand the company's own equipment services, etc., and on the other hand, accumulate experience in rail transit PPP projects, obtain complete rail transit operation management, rail transit line maintenance performance, and operation and maintenance system equipment performance, further promote the implementation of the company's strategic planning, lay the foundation for the company's extensive development of rail transit operation and maintenance business in the future, and open up market space. Implement equity incentives, and high exercise conditions demonstrate confidence. The incentive targets are the company's directors and executives. It is planned to grant 70 million stock options, accounting for about 2.52% of the company's total share capital. The exercise conditions are that the revenue for 2020-2022 is not less than 3.59 billion yuan, 4.23 billion yuan, 5.13 billion yuan, net profit of not less than 590 million yuan, 750 million yuan, 1.01 billion yuan, and ROE of not less than 7%, 7.5%, and 8%. The revenue growth rate under exercise conditions is about 20%, and the profit growth rate is about 30%. Higher exercise conditions reflect the company's confidence in development. New orders have reached new highs, R&D investment continues to increase, and future profit growth can be expected. In 2018, the company established a large railway marketing center, an urban rail marketing center, and an overseas engineering division on the basis of the original three marketing centers of large rail, urban rail, and overseas engineering, improving the company's overall marketing system. A new contract of 2881.55 million yuan was signed, an increase of 30% over the previous year. Among them, in the railway market, new contracts were signed at 133.7.42 million yuan, up 15% year on year; in the urban rail market, new contracts were signed at 897.55 million yuan, up 101% year on year; and in overseas markets, new contracts were signed at 301.22 million yuan, up 4% year on year. The company invested 243 million yuan in R&D, an increase of 19% over the previous year. The company focuses on technological breakthroughs in the fields of intelligent rail transit maintenance systems, robots, 6A video safety intelligent analysis systems, and big data. Among them, the data repair system has basically achieved intelligent and digital management of production processes such as locomotive and vehicle maintenance, equipment, and logistics materials. As R&D results continue to be implemented, new growth points can be expected in the future. Profit forecast: Considering the high cost of the company's urban rail market expansion since 2018, we adjusted the company's profit forecast to 2019-2020 to 428 million and 591 million (the original forecast for 2019-2020 was 932 million and 1,165 million), adding the 2021 net profit forecast value of 751 million yuan, corresponding to EPS of 0.15, 0.21, and 0.26 yuan, corresponding to PE 25 times, 18 times, and 15 times. Considering the continuous growth in ongoing orders, performance improvements are expected in the future Continuously reflected, the Shenzhou High Speed Rail was given a 30-fold valuation in 2019, with a target price of 4.5 yuan to maintain the “recommended” rating. Risk warning: railway fixed asset investment is declining, urban rail progress is slow, and promotion of new products falls short of expectations.