1. Overview of the incident The company released the 2019 mid-year report performance forecast: achieving net profit of 54.2 million yuan to 62.54 million yuan, an increase of 30% to 50% over the previous year. 2. The analysis and judgment revolves around smart meters. High-performing companies “adhere to intelligence and focus on big customers” business development strategies, use the pioneering advantage of pioneering R&D, production and sales of NB-IoT IoT water meters in the industry and the demonstration effect of large-scale commercial use, and have made positive progress. NB-IoT IoT water meters have successively achieved large-scale commercial use in large and medium-sized cities such as Beijing, Shanghai, Shenzhen, and Tianjin. The company's smart water meter shipments increased dramatically year on year. At the same time, the joint ventures Xitianma and Yingtan Water Supply also achieved good results, and the company's investment income increased dramatically. The favorable policy is beneficial to the company to expand its market size. At the beginning of the year, the General Administration of Market Supervision of the Ministry of Housing and Construction called for strengthening the management of the “three forms” for civilian use, such as strengthening the supervision and management of the first inspection and expiration rotation of the civilian “three forms” before installation and use. It helps the company to increase industrial concentration and expand market space. For example, the company recently won three bids for Tianjin NB-IoT IoT water meters totaling more than 700,000 units, all from the replacement market. The company is a leader in the water meter industry. It has established and maintained long-term and stable business relationships with about 1,400 water departments above the county level across the country. The customer coverage rate has reached about 40%, and the market share has always been leading the industry. The time is ripe for large-scale commercialization of NB-IoT. Smart watches are mature from networks to terminals. The three major operators completed NB-IoT network deployment in 2108. Terminal prices continued to drop, and operators provided subsidies to further stimulate manufacturers to reduce prices. Among them, China Mobile IoT requires that the NB-IoT module price be reduced to 19.5 yuan from the beginning of 2019. The low cost of modules removes barriers to the popularity of terminals. After small-batch commercialization in 2018, water companies around the world have been recognized by customers as an ideal carrier for future DMA zone measurement management of water supply networks and the establishment of an information-based and intelligent pipeline network leakage control system. 3. Profit forecast and investment recommendations The EPS for 2019-2021 is 0.13, 0.17, and 0.23 yuan, respectively, and the corresponding PE is 35.6 times, 26.7 times, and 20.4 times, respectively. The lowest and average PE values since the company went public were 34 times and 50 times, respectively, maintaining a “recommended” rating. 4. Risk warning: The development of the smart water meter industry falls short of expectations