Event: The company released its 2019 semi-annual report and achieved operating income of about 297 million yuan, an increase of 51.33% over the previous year; net profit attributable to shareholders of listed companies was about 27.1097 million yuan, an increase of 11.52% over the previous year. Accrual of bad accounts receivable dragged down profits, and Encore drove the company's revenue to soar. 2019H1 achieved revenue of 297 million yuan, an increase of 51.33% over the previous year, net profit of 27 million yuan, an increase of 11.52% over the previous year; net profit after deducting non-net profit of 22 million yuan, an increase of 82.03% over the previous year. The main reason why the company's profit growth rate is lower than that of revenue is that it is prepared to accrue 36.16 million yuan in bad receivables. Among them, the company's 2019H1 software products achieved revenue of 193 million yuan, a year-on-year increase of 35.39%, and gross margin of 93.44%, a year-on-year decrease of 2.43pct; system integration achieved revenue of 62 million yuan, an increase of 113.78% year-on-year, and gross margin of 13.55%, a year-on-year decrease of 5.59pct. At the same time, the government industry contributed 140 million yuan in revenue to the company, an increase of 164.19% over the previous year. We believe that the increase in revenue from the company's software products and integration business is mainly driven by the safe and controllable industry. As domestic terminal shipments accelerate, the company's revenue and advance payments will also grow at an accelerated pace. The accounts receivable situation is expected to improve throughout the year, and continuous investment in research and development has accumulated the ability to localize safety products. The company's 2019 H1 accounts receivable was 1,048 billion yuan, an increase of 27.84% over the previous year. We believe that as the company strengthens its corresponding collection work and the control of the share of accounts receivable is strengthened, combined with the concentration of repayments in the TOG industry in the fourth quarter, the accounts receivable situation is expected to improve throughout the year. The company invested 72 million yuan in R&D, accounting for 24.32% of revenue, an increase of 20.22% over the previous year. The company continued to invest in R&D to develop Xinyuan Doudou - a secure and reliable instant messaging platform based on private servers, equipped with an open platform, adding various high-quality standard office applications such as cloud disk applications, email systems, attendance systems, approval, schedule management, video conferencing, and live conference broadcasts, etc., to continuously strengthen the capabilities of localized security products. Application software has become the key to Encore's industrialization ecosystem, and Xinyuan Doudou teamed up with Huawei to accelerate promotion. Catalyzed by the triple factors of policy, technology, and market, Encore's progress is very obvious, and the market space for Encore related software and hardware products and services is expected to reach the trillion level. At the same time, localized application software has become the key to building an ecosystem for domestic operating systems. The company signed a strategic cooperation agreement with Dingqiao Communications to accelerate the channel promotion of localized security products represented by Xinyuan Doudou. It is expected that they will be promoted on a large scale in the Party, government, military, large enterprises, and overseas regions. Investment advice: Under the catalytic influence of the three factors of policy, technology, and market, Enco has ushered in a policy implementation. Many of the company's products have been shortlisted in the “Purchasing List”, and at the same time, the company's Xinyuan Doudou has been applied in various fields such as government and finance. The company's revenue in 2019-2021 is estimated to be 739/9.20/1,187 million, respectively, and net profit of 2.08/3.15/486 million respectively, maintaining the “buy” rating. Risk warning: competition in the industry is intensifying; government investment in security information products falls short of expectations; Xinyuan Doudou's promotion falls short of expectations; and there is a risk that key assumptions may be erroneous.