Investment highlights: The company's performance increased steadily in the first half of the year. The company recently released its 2019 semi-annual report. The announcement shows that revenue during the reporting period was 806 million yuan, an increase of 18.80% over the previous year; net profit attributable to shareholders of listed companies was 51.0709 million yuan, an increase of 27.25% over the same period last year; basic earnings per share was 0.15 yuan, compared to 0.18 yuan for the same period last year. The company's interim results are in line with market expectations. The company's operating data is stable, and 5G and overseas business have driven revenue growth since the first half of the year. As an enterprise specializing in R&D, production and sales of communication antennas and RF device products, the company is deeply involved in the domestic market. Revenue increased 19% year on year and cost increased 21% year on year, leading to a decrease in gross margin of 1.5 percentage points year on year, but an increase of 1.6 percentage points over the previous year, mainly due to the progress of the 5G project, and a large number of new product prototypes, etc., leading to an increase in costs. In terms of expenses, while sales expenses increased by 32%, management expenses fell 17%, and financial expenses were further reduced by 8 percentage points. R&D investment during the same period was 68.15 million yuan, an increase of 19%, which is in line with revenue growth. The company's operating cash flow was -97.35 million, which was 22% lower than the previous year, and the company's operations gradually became stable. In terms of specific products, the company's main products at present are base station antennas, which account for 65% of revenue, but the increase in revenue in the first half of this year was mainly due to RF devices and microwave antenna series products covering 5GHz-80GHz, which increased by 92% and 83% respectively. The share of the company's various products now tends to be balanced, and the share of major products has increased to 10%. The operating cost of other products increased by 150.74%. On the sales side, the company's overall sales increased 30% year over year due to the increase in 5G product sales by customers and the increase in existing products. At the same time, the company also vigorously expanded overseas markets, with overseas revenue of 350 million yuan in the first half of the year, an increase of 6.75% over the previous year. This is also the main source of the company's profit, because the gross margin of overseas business increased by 4.6 percentage points over the previous year, 28 percentage points higher than the domestic business. It can be seen from this that the company's future performance explosion will mainly depend on the extent to which domestic 5G construction is progressing and overseas business. The industry has entered the 5G construction cycle, and the company's 5G products are poised for release. The issuance of domestic 5G licenses in June this year began a large-scale 5G construction cycle. The share of 4G users in China increased steadily over the same period, to nearly 1.5 billion. Internet broadband access users continued to migrate to a high speed rate. At the same time, affected by the rapid growth of IoT services and increased demand for base stations, the total number of mobile communication base stations in the first half of 2019 reached 7.32 million, of which the total number of 4G base stations was 4.45 million, accounting for 60.8%. The company has seen a major turning point in the communications industry. On the basis of continuously consolidating 4G “low frequency cultivation” and “network blindness”, the company is vigorously developing 5G antennas and high-frequency microwave series products, and continuously developing 5G customers. At present, the company has formed a rich product line of communication antennas, radio frequency devices, optical modules, etc., and has developed a series of base station antennas, base station duplexers, combiners, tower top amplifiers, series microwave antennas, optical transmission modules, etc., which can meet the current diversified product needs of 2G, 3G, 4G, 4.5G, Pre5G, 5G and other multi-network formats at home and abroad, and has strong market competitiveness in the field of mobile communication antennas. On the one hand, the company's rich product line responds to the current transformation of major customers, from mobile, telecom and Unicom communication operators to communication equipment integrators such as Huawei, Nokia, ZTE, Ericsson, etc.; on the other hand, communication antenna technology is developing rapidly. In the 5G era, the technology and performance of antenna products have changed by leaps and bounds, and is developing in the direction of integration. The company enriches its product line from various aspects of upstream and downstream, including the acquisition of optical module manufacturers and filter manufacturers to improve the company's collaboration and enhance the company's products. Competitiveness. With the beginning of the 5G construction cycle, the comprehensive capacity utilization rate of the company's base station antennas and RF devices is increasing year by year, and the newly built production base will help the company's performance rise steadily. The profit forecast takes into account that 5G construction in the domestic communications industry is expected to accelerate, operators and equipment vendors accelerate preparation, and the company's 5G products will grow rapidly. At the same time, with the continuous expansion of overseas markets with high profit margins, the company's performance in the next two years is expected to enter a rapid growth cycle. We expect the company's revenue from 2019 to 2021 to reach 1,708 million, 2,817 million and 3,944 billion yuan, and corresponding net profit of 107 million, 203 million yuan, and 327 million yuan. Give the company an “increase in holdings” rating. Risk warning: The progress of 5G construction fell short of expectations, and the decline in gross profit of antenna products exceeded expectations.