Event: The company announced its 2019 annual report. In 2019, the company achieved operating income of 399 million yuan, a year-on-year decrease of 0.89%, and net profit of 112 million yuan, a year-on-year decrease of 35.09%, corresponding to earnings per share (diluted) of 0.08 yuan. Comment: 1. Performance declined in 2019, and I am optimistic that the company's satellite communications, inertial navigation, and intelligent unmanned systems industry chains will improve over the long term. (1) During the reporting period, the company achieved revenue of 399 million yuan, a year-on-year decrease of 0.89%. It was mainly affected by the current revenue decline of its subsidiary Starnet Shipbuilding, and the drone and unmanned vehicle business is still in the R&D stage and has not yet contributed to revenue. (2) During the reporting period, the company achieved net profit of 12 million yuan, a year-on-year decrease of 35.09%, a positive impact of non-recurring profit and loss on net profit of about 148 million yuan, and net profit loss after deduction of about 136 million yuan, mainly affected by the following factors: ① The company's overall gross margin decreased by 1.73 pct to 46.77%; ② The company's cost ratio for the period (including R&D expenses) increased by 2.99pct to 45.28%. Among them, the financial cost rate increased by 1.30pct, and the company continued to increase R&D investment, and R&D expenses increased by 21.86 million yuan. %; ③ The goodwill formed by the company's merger and acquisition of Starnet Shipbuilding Power is estimated to be about 144 million yuan. (3) During the reporting period, the net cash flow from the company's operating activities was $26 million, an increase of 151.90% over the previous year, mainly due to an increase in sales payback in the current period. (4) In 2020Q1, the company achieved revenue of 98 million yuan, a year-on-year increase of 23.24%, net profit of 210 million yuan, a sharp increase of 151.18%. The performance improvement in the first quarter was remarkable, and growth can be expected throughout the year. 2. Core logic: The satellite communication business breaks through the core technology of Ku/Ka co-fed dual-frequency movable antennas, military satellite communication systems are being upgraded to meet development opportunities, actively deploying maritime Internet services, and low-orbit satellite interconnection may add additional performance; habitual guidance services achieve the integration of the entire industry chain of major navigation products, and civilian driverless driving support may be a potential growth point; intelligent unmanned systems strategically lay out the military drone and unmanned vehicle market, which is expected to benefit from practical training and steady progress in the equipment informatization construction process. 3. Profit forecast: To give the company a “recommended” rating, our EPS forecast for 2020/21/22 is 0.79/1.03/1.32 yuan respectively, corresponding to 2020/21/22 PE of 35/27/21 times. Risk warning: product orders, civil goods market expansion, new product development falling short of expectations