Event summary: The company released the 2019 performance report, achieving revenue of 2,699 billion yuan, a year-on-year decrease of 24.25%; operating profit - 1,219 billion yuan, a year-on-year decrease of 315.32%; total profit - 1,224 billion yuan, a year-on-year decrease of 313.72%; net profit of 1,162 billion yuan, a year-on-year decrease of 315.35%. There was a sharp loss in performance, and revenue declined. The company released the 2019 performance report. In 2019, the company achieved revenue of 2,699 billion yuan, a year-on-year decrease of 24.25%, and realized net profit of -1,162 billion yuan, a year-on-year decrease of 315.35%. Among them, 2019Q4 achieved revenue of 536 million yuan, a year-on-year decrease of 2.37%, loss of 1,223 billion yuan, and a year-on-year decrease of 886.29%. The main reason for the decline in performance is that, on the one hand, the company conducted a preliminary impairment test of 1,742 billion yuan in goodwill from acquisitions over the years, and is expected to prepare about 1.07 billion yuan for impairment of goodwill this year. On the other hand, the company has adjusted its business structure, actively reduced the business scale of software systems and solutions, and tightened PPP and BOT projects, resulting in a decline in gross margin. At the same time, R&D expenses continued to rise, and sales and management expenses also increased. At the same time, due to the severe and complex macroeconomic environment in 2019, the company's main business revenue declined. We believe that after business adjustments, the company will focus on the two main business channels of the Internet of Vehicles and the standardization of public security law enforcement in the future, and will actively pay attention to the company's long-term development. Continue to increase investment in R&D, and implement equity incentives. The company strengthened investment in related technology and product research and development around the two major businesses of the Internet of Vehicles and the standardization of public security law enforcement, and continued to accumulate and improve technology and product capabilities. R&D expenses continued to increase year-on-year in 2019. At the same time, increased resource investment on the sales market side and management side led to an increase in sales expenses and management expenses in 2019 compared to the same period last year. The second phase of the company's equity incentive plan has been implemented. The incentive targets 65 financial directors, core management, business and technical key personnel. The performance assessment target is based on 2019, and the revenue growth rates in 2020 and 2021 are not less than 30% and 70%, respectively. We believe that the company is currently in a stage of further focusing on strategy and resources. Continued R&D investment has built the company's core competitiveness, and the growth of sales and management expenses is the only path through the transformation period, laying a good foundation for future growth. Equity incentives have been implemented, and the company's performance assessment goals are clear, demonstrating confidence in the company's future business development, and the incentive mechanism will help unleash the company's development potential. The Internet of Vehicles has a significant first-mover advantage and continues to win bids for Internet of Vehicles projects. In 2016 and 2018, through the acquisition of ZTE IoT and ZTE Smart Connect, the company laid out the automotive terminal and electronic license plate industry chain, and combined its own IoT solutions and related application platforms to seize the industry opportunities brought by the transition from 4G to 5G, and created a series of major transportation products and solutions centered on pre-installation/rear-mounted vehicle networking terminals and automotive electronic signage, covering important fields such as urban traffic management, urban transportation, and public travel services. It gradually realized a mass transit IoT layout covering all vehicles, roads, and people, forming a “car+roadside equipment+solution +” With the “application platform” business layout, the company also has significant channel advantages. Downstream customers include telecom operators, automakers, insurance companies, the Ministry of Transport, the Ministry of Public Security, and the Railway Administration. In 2019, the company continued to win bids for projects related to the Internet of Vehicles. We believe that the company's experience in system construction and operation and channel resource advantages are expected to have significant synergies, help accelerate the development of the car-road collaborative transportation market, benefit from the growth of in-vehicle modules in the short term, and benefit from the foundation of vehicle-road collaboration in the medium to long term. Investment suggestions: The company concentrates resources to support the development of main waterways, increases R&D investment, focuses on new high-growth Internet of Vehicles and public security law enforcement services, and achieves full coverage of “vehicle+roadside equipment+solution+application platform”. Considering that the Internet of Vehicles industry is still in the stage of increasing investment, the profit forecast will be adjusted downward. We expect the company's net profit in 2019-2021 to be -1,162 million, 78 million and 160 million yuan, respectively, and the corresponding EPS is -0.68 yuan/0.04 yuan/0.09 yuan, respectively, adjusted to the “increase in holdings” rating. Risk warning: Domestic car companies' customer expansion falls short of expectations, overseas business may be affected by trade disputes between China and the US, risk that public security informatization bidding may be delayed, risk that the electronic license plate market will develop less than expected, and market systemic risks.