Events: The company released its 2019 semi-annual report on August 15. The company achieved operating income of 1,593 billion yuan, up 34.7% year on year; net profit attributable to shareholders of listed companies of 45 million yuan, up 16.8% year on year; net profit from deducted non-recurring profit and loss attributable to shareholders of listed companies was 35 million yuan, up 22.0% year on year; in the first half of 2019, the company achieved EPS of 0.07 yuan, in line with expectations. Comment: 1. The performance was in line with expectations. The financial industry and network product sales sector grew rapidly according to the company's semi-annual performance forecast. The predicted net profit range was 4219.86-460.34 million yuan, up 10%-20% year on year, median value of 44,116,800 yuan, up 15.0% year on year. The company's operating income and net profit for the first half of 2019 were 1,593 billion yuan and 145 million yuan respectively, up 34.7% and 16.8% year on year, slightly higher than the median level in the forecast range. Among them, the single-quarter operating income and net profit for the second quarter were 588 million yuan and 032 million yuan respectively, down 14.1% and 3.9% from the previous year, respectively. The company's overall business maintained steady growth in the first half of the year, mainly due to the rapid increase in network product sales and financial business revenue. Judging from the industries where customers are located, the financial industry and the Internet product sales sector are growing rapidly in revenue. Network product sales achieved revenue of 1,129 billion yuan in the first half of the year, an increase of 47.7% over the previous year. Network product sales revenue accounted for 70.9%, an increase of 6.2 percentage points over the previous year. The scale of the subsidiary Jinhuawei continued to expand, achieving net profit of 24.3525 million yuan in the first half of the year; the financial industry achieved revenue of 197 million yuan, an increase of 29.5% over the previous year. The subsidiary Weinbett achieved good integration with the company's basic technology platform, and contributed 1,02.27,300 yuan in net profit in the first half of the year. Combined with the expansion of bank credit management demand brought about by the continued rise in household personal credit leverage, the company's operating income and profit continued to grow rapidly based on credit risk control. The telecom industry grew by 2.6% in the first half of the year. The 18H1 revenue base was high mainly due to early settlement of operator projects last year. Specifically, after entering China Mobile through a big data project last year, the China Mobile framework amount was raised to 24 million yuan (9.66 million yuan in 2018) in the first half of this year, and telecom projects in Jiangxi and Liaoning were added. Overall, the company's operator business continued to advance steadily. The launch of government projects was delayed compared to last year. The government industry's revenue for the first half of the year fell 11.62% year on year, but actual contract amounts increased dramatically. In May-August of this year, public security projects won bids one after another, which will be reflected mainly in revenue in the second half of the year. 2. Continuously improve management capabilities and lean operation levels, increase R&D efforts, and promote 5G application innovation. Judging from gross margin, the company's overall gross margin for the first half of 2019 was 20.08%, which remained stable over the previous year. In the first half of 2019, the gross profit margin of the telecommunications industry was 50.96%, down 1.35 percentage points from the previous year; the gross profit margin of the financial industry was 48.22%, down 2.96 percentage points from the previous year (the gross margin of operation services was low); the gross profit margin of the government industry was 45.02%, down 1.38 percentage points from the previous year; the gross profit margin of other industries was 46.73%, up 1.37 percentage points from the previous year; and the gross profit margin of network product sales was 8.28%, down 1.57 percentage points year on year. The company will further strengthen cost control, and some of the projects invested in 2018 will be implemented one after another this year. The overall gross margin will remain basically stable, and the gross margin of the public security industry will increase. The company's cost control has been further strengthened, and profitability has gradually increased. The company uses regions as profit centers and operating entities, and allocates resources around profit centers to ensure that resource investment meets the requirements of maximizing organizational efficiency. The sales expense ratio for the first half of 2019 was 3.95%, down 1.47 percentage points from the previous year. The company established a regional sales system to strengthen the integration and synergy of various business line personnel, so that the sales expense ratio continued to be optimized; the management expense ratio was 4.79%, down 1.03 percentage points from the previous year; the financial expenses were 305.305 million yuan, up 55.05% year on year, and the financial expense ratio was 1.92%, up 0.25 percentage points year on year, mainly due to increased interest expenses. Increase 5G-based technology research and development, continue technology iteration, and implement industry applications. In 2019, H1's R&D expenses were 103 million yuan, an increase of 6.84% over the previous year. The company aims to improve efficiency and core competitiveness, and encourages technical teams to develop reusable software products. The R&D cost rate for 2019 H1 was 6.44%, down 1.68 percentage points from the previous year. The company continues to increase 5G-based technology research and development, and has established various technology research and development centers such as big data and artificial intelligence, cloud computing, mobile internet and the Internet of Things, and information security. In the 5G era, the company will continue to empower telecom operators and comprehensively promote application scenario innovation in the 5G+ industry. The company's operating cash flow for the first half of 2019 was -306.673 million yuan, an increase of 50.74% over the previous year. Operating cash flow for the first quarter was 127.324 million yuan, a significant improvement from the end of 2018 - 94.023 million yuan. Sales revenue increased sharply in the first quarter, mainly due to value-added tax reform, customers rushed to prepare goods. The company's operating cash flow for the second quarter was -157.9913 million yuan. Compared with the same period last year, there was a large net outflow, mainly due to fewer purchases made by Jinhuawei in the first quarter and increased stocking in the second quarter. 3. The explosion of data volume in the 5G era combined with application scenario innovation brought about the beginning of an era of software iterative demand and the Internet of Everything. Data volume has exploded unprecedentedly, and existing systems cannot carry 5G traffic requirements. The company will build a two-tier structure of cloud billing+professional billing through hierarchical deployment to solve 2B's huge traffic, call list processing time, and meet 2B customization capabilities in the 5G era. In addition, 5G application scenarios will be comprehensively revolutionized, and telecom operators' business models will undergo major changes. IT system transformation is needed to meet the operating requirements of the new business scenarios. The company has been deeply involved in the telecommunications field for many years and will build a business-oriented billing system for 5G scenarios. The billing part has sunk to the edge of the core network, carrying the billing and strategic control of 5G slices; in terms of CRM, CPCP is the center of the entire B domain, integrating sales value services provided by 5G; and marketing services are superimposed on the existing inventory system with scenario contact capabilities. After 5G is commercialized on a large scale, changes in 5G business scenarios and increased data volume will bring new demand to the company's BOSS system. Furthermore, the rise of the Internet of Things also requires the support of a large number of data platforms. However, software demand is generally released gradually as data volume increases and business changes, and the company has set standards and made R&D reserves for 5G products and operators in the early stages. The company is a type of backward cycle benefiting from 5G construction, and comprehensive billing system updates will gradually increase as 5G construction progresses. 4. Demand for cloud computing warmed up in the second half of the year, and the trend of cloud-based industrial IT brought opportunities for continuous growth. In the 5G era, micro data centers will be set up at the edge of the network, and cloud integration will gradually become a trend. AI is the core engine of the future intelligent society. Artificial intelligence needs to consume a large amount of cloud computing resources, and demand for cloud computing will gradually be released. The company's performance in the second half of the year is expected to be accelerated by the increase in cloud computing prosperity... The IT systems of large and medium-sized enterprises are gradually shifting in the direction of cloud computing, and the trend of industrial cloudification is strengthening. The company maintains close cooperation with cloud computing giants such as Ali, Huawei, and Tencent, and has accumulated rich capabilities to support industry application scenarios. As the communications industry supports the cloud and intelligent development of systems, the company continues to increase its investment in cloud computing, big data, and artificial intelligence, and already occupies a core competitiveness and leading position in the application layer field. As demand for IT cloud computing picks up, the company is expected to benefit from the business growth opportunities brought about by the cloud-ization of inventory and incremental customer systems. 5. The public security market has broken through rapidly, and product componentization has helped the company achieve business decline. We are optimistic about the company's development prospects in the field of public safety. In the context of the information age, the value of big data is gradually showing. Establishing a public security data system connected to different police departments is the primary task of public security informatization reform. The company is deeply involved in the field of public security informatization construction, and projects have already been implemented in developed cities such as the Pearl River Delta, Yangtze River Delta, and China. After the company componentized and fragmented public security products, it successfully fell into the public security business needs of third-tier cities and districts, counties, and cities. There was a rapid breakthrough in the public security industry market in the first half of this year, successfully expanding into new markets in Foshan, Zhanjiang, Chongqing, Ezhou, Jurong, Suqian, Shaoyang, Linwei, Chifeng, etc. The amount of contracts in the public security industry increased significantly compared to the first half of last year. Due to the influence of macroeconomic factors at home and abroad, the commencement and signing of contracts was delayed compared to expectations, and revenue achievement was mainly reflected in the second half of the year. 6. 5G+ cloud computing opens up future space, and maintaining the “highly recommended-A” rating 5G+IT cloudification is the company's two main growth drivers in the future. The explosion of traffic in the 5G era and the comprehensive innovation of application scenarios have brought about the need for iterative upgrades of software systems. The company has been deeply involved in the BOSS field of the three major operators for many years. It occupies a high share in the operator field, maintains close cooperation with manufacturers such as Ali, Tencent, and Huawei, and continues to expand its business capabilities in the fields of big data and cloud computing. The company deeply serves government (public security) and financial industry customers, and has expanded into many industries, and has accumulated rich industry application scenario support capabilities. Demand for cloud computing warmed up in the second half of the year, and the industry's IT cloud trend is expected to bring growth opportunities to the company. The 5G+ cloud computing two-wheel drive is optimistic about the company's growth potential in the 5G era. The company's net profit for 2019-2021 is estimated to be 278 million yuan, 367 million yuan, and 491 million yuan respectively. The corresponding EPS is 0.44 yuan, 0.58 yuan, and 0.77 yuan respectively, and the corresponding PE is 18.6 times, 14.1 times, and 10.5 times, maintaining the “Highly Recommended - A” rating. Risk warning: operators' capital expenditure falls short of expectations, industry expansion falls short of expectations, industry investment declines