Event: The company released its 2019 semi-annual report. During the reporting period, it achieved operating income of 310 million yuan, an increase of 5.4%, net profit attributable to shareholders of listed companies - 70.83 million yuan, and profit of 54.54 million yuan for the same period last year. Staff expansion is dragging down financial performance. It is expected that the second half of the year will improve. The company's profit will drop sharply despite a slight increase in revenue. We expect it to be mainly dragged down by staff expansion. The company's sales expenses, management expenses, and R&D expenses increased by 57%, 51%, and 125% respectively during the reporting period, significantly faster than revenue growth. Judging from the cost details, of the three fees, the main personnel-related remuneration and travel expenses increased by 57%, 52%, and 98%, respectively. At the same time, during the reporting period, the company introduced 19 new PhDs, 128 master's degree students, and 67 middle and senior professionals as proof. The introduction of sufficient talent is based on a forward-looking layout based on future business expectations. As projects are confirmed as scheduled in the second half of the year, it is expected that the cost ratio and profit margin will improve markedly. At the same time, the company's gross margin fell to 46.6% during the reporting period from 62.5% in the same period last year. It is estimated that this is mainly due to the increase in the share of revenue in the construction engineering business with low gross margin due to delays in the confirmation of phase II of the Hefei City Lifeline Monitoring System and some overseas projects. The city's lifeline has been expanded and implemented from other locations. Overseas market performance can still be expected that the company signed a new Huaibei safety supervision project (phase I) during the reporting period, a Beijing group limited liability company's 2019-2021 gas online monitoring equipment procurement and installation project, won the bid for Tongling underground pipeline network informatization and safety operation monitoring systems, etc., and the logic of expanding the urban lifeline detection system from other locations will gradually be realized. At the same time, the overseas market company has signed a new “911 emergency response system” project contract in Dominica, North America. In addition, CLP's import and export have become an important strategic shareholder to help the company's important strategic shareholders expand in overseas markets, so future performance in overseas markets can still be expected. Investment suggestion: Considering that the pace of revenue confirmation from the company's overseas projects did not meet expectations, the company's net profit attributable to shareholders of listed companies in 2019-2020 was lowered to 205 million yuan and 262 million yuan respectively. The company's net profit attributable to shareholders of listed companies is estimated to be 324 million yuan in 2021. The corresponding EPS for 2019-2021 are 0.88, 1.13, and 1.39 yuan/share, respectively. We are optimistic about the potential of the company's urban lifeline business to expand offsite and maintain a “buy” rating. Risk warning: The pace of revenue confirmation for overseas orders falls short of expectations.