Incident: The company announced that the subsidiary Zhongheng Borui and State Grid ICT Yili Technology signed the “Purchase Contract for Integrated Ground Fault Protection System Equipment Required for Zhejiang Power Grid Comprehensive Energy-saving and Quality Improvement and Efficiency Improvement Project (Phase II)” on December 18, 2019. The contract amount was 67.85 million yuan, accounting for 6.89% of 2018 revenue. Enter the supply chain of CITIC Group's subsidiaries to verify the superior position of integrated energy services. 1) State Grid ICT Yili Technology is a wholly-owned subsidiary of the ICT Group, a unit directly under the State Grid. It is mainly engaged in power informatization and data analysis business. Yili Technology is one of the important supporting units for ubiquitous power IoT construction, and its share in the 2019 tender for new information technology services reached 5.82% (according to the bid amount). 2) Zhongheng Borui is a wholly-owned subsidiary of the company. It has been deeply involved in the field of power informatization for 20 years. Its business covers the four major directions of intelligent scheduling, lean production management, line loss and energy consumption, and integrated energy services. It has participated in the construction of the State Grid SG186 project, leading share in the field of relay protection settings, and is a leading private enterprise in the power information technology industry. This cooperation validates the company's dominant position in the field of integrated energy services of the State Grid. It will help the two sides establish a long-term strategic cooperative relationship and fully promote the quality, efficiency, and strategic transformation of the national grid. Ubiquitous ecosystems and energy interconnection platforms collaborate to support ubiquitous comprehensive construction. The company actively lays out the energy Internet, promotes software and hardware integration and business collaboration. Using modern communication and IoT technology, the company relies on Zhongheng Borui's rich experience in power informatization and an integrated energy Internet of Things platform to build a ubiquitous power IoT system ecosystem based on autonomous devices and integrating various partners. In September 2019, it supported the construction of a ubiquitous IoT demonstration base and a national integrated energy service demonstration base in Zhejiang Province (responsible for the construction of a comprehensive energy service platform in Zhuantang Industrial Park). In the context of entering the comprehensive construction phase of the ubiquitous power Internet of Things in 2020, the company is expected to deeply participate in the construction of the ubiquitous platform layer (lean management) and application layer (integrated energy service, line loss monitoring) with Zhongheng Borui's qualification advantages and forward-looking layout results of the energy Internet. HVDC boosts 5G and IDC, and the Panamanian system brings in additional performance. The company has been deeply involved in the field of communication power supplies for many years. As a leader in high-voltage DC power supply technology (HVDC), the current 5G base station layout is accelerating, which is expected to spawn more than 50 billion yuan of power demand space for 5G base station communication equipment; distributed computing scenarios such as global big data are rapidly expanding, bringing a significant increase in data center power demand. In November of this year, Ali Joint Company launched the IDC integrated power supply solution Panamanian System, which can drastically reduce distribution link costs and installation space. While consolidating its leading position in the HVDC field, it is expected to further increase its share in the large-scale IDC power supply field. Investment advice: The company is a domestic HVDC leader. It has obvious advantages in the field of communication base station power supply and IDC power supply solutions, and will fully benefit from 5G commercial acceleration and data scale expansion in the future; Zhongheng Borui has been deeply involved in power informatization for many years and has ubiquitous overall solution capabilities, and is expected to fully support the comprehensive promotion of ubiquitous use. We expect that the company's net profit in 2019-2021 will reach 1.09/175/243 million yuan, and EPS will be 0.19/0.31/0.43 yuan respectively, corresponding to the closing price of PE on December 18, 2019 will be 65.1/40.5/29.2 times, respectively, maintaining an increase in holdings rating. Risk warning: 5G base station construction falls short of expectations, IDC construction falls short of expectations, ubiquitous power IoT construction falls short of expectations