Incident: Sega Technology released its semi-annual report. In the first half of 2019, it achieved operating income of 910 million yuan, an increase of 66.87% year on year, and net profit to mother of 60.44 million yuan, an increase of 350.88% year on year. The previous quarterly report estimated that the company's net profit for the first half of the year would be between 53.62 million yuan and 67.02 million yuan, which is in line with the scope of the previous forecast. RF devices and antennas are the main sources of revenue growth. In terms of revenue by product in the first half of the year, metal RF devices and antennas contributed 259 million yuan and 287 million yuan respectively, up 141.65% and 141.34% year-on-year respectively. These two businesses are the main drivers of revenue growth. Gross profit margins have increased significantly. The company's gross margin reached 22.67% in the second quarter of 2019. Previously, the gross margin for the first quarter was only 16.26%, and the gross margin for the second quarter of 2018 was 14.55%. The company's gross margin increased significantly year-on-year and month-on-month. By product, antennas are the main products with increased gross margin. We judge that the increase in gross margin was mainly due to the gradual increase in 5G products in the second quarter of 2019, and the company's product structure was optimized. Shipments of new products, ceramic radio frequency devices, began. On January 29, 2019, the company obtained 51% of the shares in Jiefin Electronics. At the same time, the company signed a proposed acquisition agreement. In the future, it will transfer the remaining shares based on the average non-net profit deduction for 2019-2022 and at a price-earnings ratio of 14 times. Furthermore, the company's interim report revealed that ceramic RF devices have already achieved revenue of about 3.09 million yuan, and the company's layout in the direction of ceramic filters has gradually begun to show results. Successfully entered the Ericsson supplier system. The company's interim report revealed that it has successfully entered Ericsson's supplier system and has begun small-batch supply. Huawei, Ericsson, Nokia, and ZTE account for about 85% of the market share, and the company has established partnerships with Ericsson and ZTE. Furthermore, the company's overseas platform Dengyo USA has completed the first order delivery, and the company is expected to use this platform to explore the North American market in the future. Investment advice: We continue to be optimistic about Sega Technology's layout in the radio frequency field, and believe that leading domestic companies are expected to gain more market share in the 5G field. We expect net profit attributable to mother for 2019-2021 to be $162 million, $277 million, and $460 million, up 233%, 71.2%, and 65.9% year over year. The corresponding EPS for 2019-2021 was 0.96 yuan, 1.65 yuan, and 2.73 yuan respectively; according to the closing price on July 30, the 2019-2021 PE was 44.02 times, 25.71 times, and 15.5 times, respectively. According to the Comparable Company Valuation Law, we gave the company 40-50 times PE in 2019, with a corresponding reasonable value range of 38.47 yuan - 48.08 yuan, maintaining a rating of “superior to the market”. Risk warning: 5G progress falls short of expectations, market competition risk, trade friction risk.