Matters: The company announced its 2019 semi-annual report. In the first half of the year, the company achieved operating income of 297 million yuan, an increase of 51.33% over the previous year; realized net profit of 27.1097 million yuan, an increase of 11.52% over the previous year; and realized net profit of 22.051 million yuan, an increase of 82.03% over the previous year. Ping An's view: Revenue growth accelerated markedly in the first half of the year, and performance improved markedly: In the first half of the year, domestic investment related to cybersecurity, autonomy and control was large, and tenders for related products and solutions increased markedly, and the company benefited significantly as a leading enterprise in terminal security. In the first half of the year, revenue increased by 51.33%, 35.09 percentage points faster than the same period last year. Among them, software products achieved revenue of 193 million yuan, a year-on-year increase of 35.39%, and the growth rate was 8.28 percentage points faster than the same period last year; system-integrated equipment achieved revenue of 62 million yuan, an increase of 113.78% over the same period last year, and the growth rate was 135.56 percentage points faster than the same period last year, showing a good recovery trend. In the first half of the year, the company's net profit grew steadily; net profit after deducting non-net profit decreased significantly due to a significant decrease in the impact of structured savings and financial management income, and increased sharply by 82.03% over the previous year. Increased sales and channel construction have shown results, providing strong support for the company's business development: in the first half of the year, the company achieved rapid growth in revenue. In addition to the rapid increase in market demand, the increase in the company's own sales and channel investment is also an important reason. In the first half of the year, the company's sales expenses reached 66 million yuan, a sharp increase of 36% over the previous year, and the growth rate was 26.94 percentage points faster than the same period last year. In addition to the increase in sales staff, the company has also significantly increased its investment in advertising and customer technical service support. In the first half of the year, corporate advertising expenses increased 114.39% over the same period last year; technical service fees increased 55.16% over the same period last year; and office expenses increased 58.16% over the same period last year. R&D investment has maintained a relatively rapid growth, and product market adaptability has increased: the company's three main businesses are “information security, the Internet, and big data,” and the output form is “software, system integration equipment and services.” The company continues to innovate to meet the rapidly iterating needs of the market and maintain the competitive advantage of its core and innovative businesses. In the first half of the year, the company continued to strengthen core technology development and promote product upgrades and structural adjustments around major businesses such as information security. In the first half of the year, the company's R&D investment reached 72.1965 million yuan, an increase of 20.22% over the previous year, and R&D investment accounted for 24.32% of revenue. Investment suggestions: According to the company's semi-annual report, we maintain the company's profit forecast. The company's EPS for 2019-2021 is expected to be 0.10 yuan, 0.14 yuan, and 0.17 yuan respectively. The P/E corresponding to the closing price of August 27 is 52.4, 39.3, and 31.4 times, respectively, maintaining the “recommended” rating. As a leading terminal security enterprise in China, Beixinyuan has typical software and commercialization characteristics. The product is highly standardized, and it is widely used in key industries such as government, energy, military, and finance, and has stable customer relationships. While optimizing the product structure, the company has also significantly increased its sales investment. It is expected that the company's revenue and profit will continue to grow at a relatively rapid pace in the second half of the year. Risk warning: (1) The risk of a company's gross margin falling. Controllable security is the main focus of implementation of China's “cyber power” strategy. The country may encourage more powerful enterprises to enter this field, competition in the industry may further intensify, and there is a risk that the gross margin of enterprises will decline. (2) Xinyuan Doudou's growth may fall short of expectations. Xinyuan Doudou is facing a complex competitive pattern, and there are strong competitors in different segments. In the future, if the enterprise is unable to maintain continuous innovation and market development, the advancement of this business may face resistance. (3) Government and enterprise IT spending falls short of expectations. Under the downward pressure of the economy, downstream government and enterprise customers may experience a decline or delay in IT spending due to limited financial resources, which has a negative impact on the company's orders and revenue.