The 1H19 performance is in line with our expectations. Mikawa Wisdom announced 1H19 results: operating income of 343 million yuan, up 10.3% year on year, mainly due to the rapid increase in smart water meter revenue of 72% year on year; net profit to mother of 58 million yuan, up 40.0% year on year. The growth rate is at the center of the performance forecast, corresponding to earnings of 0.06 yuan per share, net profit after deducting 54 million yuan, an increase of 51.7% year on year. The performance is in line with our expectations. Looking at a single quarter, 2Q19 achieved revenue of 197 million yuan, a year-on-year increase of 16.7%, and net profit to mother of 37 million yuan, an increase of 55.7% over the previous year. Smart watch revenue is growing rapidly and profitability has increased dramatically. 1H19's regular watch and smart watch revenue was 0.98/177 million yuan, up 5.6%/42.4% year-on-year respectively. The gross margin of the company's regular table and smart watch businesses in the first half of the year was 24.9%/45.4%, down 0.54 ppt year on year and up 6.9 ppt year on year, respectively; the rapid growth in smart meter revenue and a sharp increase in gross margin led the company's comprehensive gross margin to increase 4.5ppt to 36.2%. R&D investment increased, and active preparation to meet order requirements. The company's management/R&D/finance expense ratios for the first half of the year were -1.3/+1.3/+0.7ppt, respectively. Net profit margin increased 3.6ppt to 17.0% year over year due to higher gross margin. Mainly due to a sharp increase in smart watch orders and an increase in the company's inventory, the company's inventory increased by 94.43 million yuan over the same period last year; 1H19's net cash outflow from operating activities was 40 million yuan, an increase of 25 million yuan over the same period last year. The development trend is beneficial for both policy and technology. NB-IOT IoT IoT water meters are being commercialized. Benefiting from national macroeconomic policy requirements, local transformation and upgrading plans, and in-depth cooperation between enterprises and operators, the commercialization of IoT water meters is gradually progressing. Since March 2017, Shenzhen launched the world's first NB-IOT intelligent water commercial project, and Fuzhou, Yingtan and other places have begun large-scale NB-IOT smart water meter deployments. In February 2019, the work report of the Tianjin Municipal Government proposed that the NB-IOT smart water meters for 3.75 million households should be updated within two years. China's “Outline of the 13th Five-Year Plan for the Water Meter Industry” indicates that during the “13th Five-Year Plan” period, China's smart water meters (including intelligent application systems) sales revenue will account for 40% of total water meter sales. It is estimated that during the “13th Five-Year Plan” period, China will add more than 150 million smart water meters, corresponding to the scale of the industry exceeding 40 billion yuan. The NB-IOT IoT water meter market prospects are promising. Profit forecast and valuation We maintain the company's profit forecast for 2019/20 unchanged. The company's current stock price corresponds to 33.8/28.0 times P/E in 2019/20. We maintain that the company outperforms the industry rating and target price of 5.40 yuan. The target price corresponds to 40/33 times P/E in 2019/20, and there is 18% room for growth compared to the current stock price. The promotion of risk smart water meters fell short of expectations.