Event: The company released its 2019 annual report, achieving operating income of 2,451 billion yuan, a year-on-year decrease of 7.00%, net profit attributable to shareholders of listed companies of 322 million yuan, a year-on-year decrease of 15.25%, and net profit attributable to shareholders of listed companies deducting non-recurring profits and losses of 243 million yuan, a year-on-year decrease of 33.72%. At the same time, the company released its 2020 quarterly report, achieving operating income of 416 million yuan, a year-on-year decrease of 24.64%, net profit attributable to shareholders of listed companies of 015 million yuan, a year-on-year decrease of 78.56%, and net profit attributable to shareholders of listed companies deducting non-recurring profits and losses of 0.09 billion yuan, a year-on-year decrease of 85.66%. In line with market expectations. 2019 declined due to orders from major customers in strategic industries, and 2020Q1 was mainly affected by the phased impact of the new epidemic. 1) The decline in revenue was mainly affected by strategic emerging industries (especially logistics and new retail). In 2019, it achieved revenue of 1,831 billion yuan, a year-on-year decrease of 7.81%, accounting for 74.70% of the company's revenue. In the logistics sector, it is expected that due to changes in the business strategies of major customers such as Toyosu, etc., the speed of courier cabinet installation will slow down, and sales will decline. Due to changes in the business strategies of major strategic customers and other reasons, the number of original product orders delivered and installed for retail lockers declined sharply over the same period last year. In the financial sector, the company closely follows the trend of intelligent transformation of bank branches. Taking advantage of the “gold standard” policy opportunity to implement and promote, there are many mid-report projects for bill modules, cash cycle movements, and sorting machine products, and financial services have shown significant growth. Furthermore, the traditional business achieved revenue of 620 million yuan, a year-on-year decrease of 4.49%, and remained basically stable. 2) The gross margin of the current strategic emerging industries (finance, logistics, new retail) was 42.71%, an increase of 0.30 percentage points over the previous year. Emerging industries are mainly affected by the decline in overall demand. The competitive landscape has not deteriorated, and gross margin is relatively stable. The current gross margin of the traditional business was 47.66%, an increase of 2.54 percentage points over the previous year. Barriers to scanning and printing technology ensure high gross profit margins. 3) Non-recurring profit and loss for the current period was 79 million yuan, mainly investment income of 49 million yuan and 31 million yuan in government subsidies from the disposal of Hualing Electronics' 8% equity. 4) The outbreak of the new epidemic in the first quarter of 2020 was affected by delays in the resumption of work and local quarantine policies, inconvenient travel, construction and installation conditions, and delays in marketing, production delivery, and installation and acceptance of major products to varying degrees, leading to a sharp decline in current operating income and net profit. Investment in R&D continues to be high, and operating cash flow has been drastically improved. 1) The company invested a total of 408 million yuan in R&D in this period, an increase of 21.54% over the previous year, accounting for 16.65% of operating income. The company continues to increase technology research in finance, logistics, new retail, and other business directions. By the end of 2019, the company had a total of 1,461 patents, including 392 invention patents (including 82 international invention patents). At the end of 2019, the company had 1,552 R&D personnel, accounting for more than 30% of the number of employees. In addition, sales expenses for the current period were 300 million yuan, down 0.78% year on year, and management expenses were 147 million yuan, up 10.89% year on year. 2) The net operating cash flow for the current period was 339 million yuan, an increase of 169 million yuan over the previous year, mainly due to the launch of cost management optimization projects and lean production management consulting. The advantages of large-scale production capacity, quality and cost control are still there. New retail and other industries fluctuate in the short term, and are still expected to continue to grow under the trend of unmanned operation. 1) The company has accumulated large-scale production capacity for precision components for many years, creating barriers to product quality and cost control. The product line ranges from key basic components for printing and identification to integrated smart terminals and systems. For example, the annual production capacity of contact image sensors exceeds 5 million units, the annual production capacity of complete printing and scanning products exceeds 1.2 million units, and the annual production capacity of intelligent production plants for self-service terminal integrated products has moved from 250,000 units to 350,000 units, all of which can quickly meet market order requirements. 2) Considering that the average annual wage of employed people in China increased by about 10% year on year, and that the country's elderly population aged 60 and above exceeds 240 million, accounting for 17.3%, far exceeding the “threshold” of an aging society of 10%. Under the influence of the new epidemic, the deepening application of unmanned solutions has been accelerated, especially in the financial, new retail, logistics, and medical industries. Maintain the “Overweight” rating. According to key assumptions and adjusted profit forecasts for the 2019 annual report, the estimated operating income for 2020-2022 is $3.109 billion, $3,816 million, and $4,541 million ($3,838 million and $4.679 million before the 2020-2021 adjustments), and net profit for the period 2019-2021 is 389 million, 519 million, and 662 million (476 million and 617 million before the 2020-2021 adjustments). Maintain the “Overweight” rating. Risk warning: Demand in strategic emerging industries falls short of expectations; increased industry competition; risk that key assumptions do not match facts.