In the first half of 2019, the company achieved revenue of 377 million yuan, a year-on-year increase of 9.08%, net profit of 41 million yuan, a slight increase of 2.40% over the previous year, and net cash flow from operating activities of -78 million yuan, a year-on-year decrease of 53.61%. Zhongheng Borui supported stable performance in the first half of the year, communication power system revenue was 183 million yuan, down 1.9% year on year, and gross margin fell 4.94 pct to 27.92%; power operation power system revenue was basically the same as last year, and gross margin fell slightly by 0.88pct to 31.42%; Zhongheng Borui's software development, sales and service business was driven by concentrated demand from the State Grid, with revenue of 75 million yuan, up 69.29% year on year, and gross margin increased 8.14pct to 72.15%. The overall gross margin increased by 2 pct to 39.25%, and the period fee ratio increased by 2.8 pct, offsetting the increase in gross margin. There was a marked increase in the turnover ratio of inventory and accounts receivable, but this was offset by an increase in the turnover ratio of accounts payable during the same period, resulting in a year-on-year decline in net operating cash flow. Communication power supplies are under pressure in the short term and are expected to benefit from the explosion of 5G base stations in the future. The company has been deeply involved in the communication power supply business for many years. The products meet the needs of rapid deployment from terminal base stations to communication computer rooms in the 5G commercial promotion process. In terms of terminal base stations, since 5G base stations consume more power than 4G and cover a smaller area, the promotion of 5G needs to increase the density of base station construction, especially the number of micro stations built, on the basis of the expansion of existing macrostations. Currently, the number of 4G base stations in China is about 4.5 million, and the number of 5G base stations built in the future is expected to reach 5 million. Demand for communication power has not been fully released due to the fact that base station construction has not fully started at this stage, so the company's communication power supply business will be under pressure in the short term. In the future, as the scale of microstation construction increases, the company's communication power supply business will benefit. In terms of data centers and communication computer room equipment, customers include high-quality major customers such as China Mobile, China Unicom, Ali, Tencent, and Baidu. The 30KW HVDC power module currently being developed can quickly match the needs of large-scale data centers, while reducing power loss and investment costs. Relying on online car-hailing platforms to enter charging pile operations, the user-side energy management company leverages the advantages of Didi's exclusive charging equipment supplier in the national market to cooperate with companies such as Didi and BP to operate charging stations. It has signed a “Cooperation Framework Agreement” with Xiaoju New Energy and Zhejiang Investment on charging pile investment and operation cooperation. Currently, the utilization rate of charging stations delivered to Didi remains above 99.84%, which has certain operational advantages. In recent years, the company has gradually expanded and expanded customer needs outside the national grid, actively laid out enterprise-side comprehensive energy service plans, expanded from SCADA (data collection and safety monitoring) to energy consumption analysis, and continued to expand the number of customers. Under the opportunity of the State Grid starting a new construction cycle for ubiquitous networks, the company stimulates users' demand for comprehensive energy management, which is expected to become a new profit growth point in the future. Investment advice We estimate net profit of $1.36/1.88/232 million yuan on 2019/20/21, and EPS at 0.24/0.33/0.41 yuan, giving it an “increased holdings” rating.