Key investment events: The company released its 2020 quarterly report. During the reporting period, the company achieved operating income of 150 million yuan, a year-on-year decrease of 50.02%; realized total profit of 61 million yuan, a year-on-year decrease of 9.58%; realized net profit of 61 million yuan, a year-on-year decrease of 6.00%; and realized net profit deducted from non-return mother of $67 million, a year-on-year decrease of 7.03%. The company's revenue declined in the first quarter, and the increase in gross margin was beneficial to business operations. During the reporting period, the company achieved revenue of 150 million yuan, a year-on-year decrease of 50.02%, mainly due to a decrease in the revenue scale of the company's radar electronics sector and security electronics sector during the reporting period. Net profit of 61 million yuan was realized, a year-on-year decrease of 6.00%. In terms of gross margin, the company's overall gross margin increased. The company's gross margin during the reporting period was 30.69%, an increase of 12.96 percentage points over the same period last year. The company's R&D investment continues to increase, and we are optimistic about the company's performance throughout the year. During the reporting period, the company's expense ratio was 75.33%, an increase of 36.87 percentage points over the previous year. Among them, the sales expense ratio was 46.00%, an increase of 25.93 percentage points over the same period last year; the R&D expense ratio was 4.00%, an increase of 0.99 percentage points over the same period last year, and the company increased its R&D investment. In terms of cash flow, the company's net cash flow from operating activities was -403 million yuan, an increase of 24.23% over the previous year. During the reporting period, the company's inventory was 1,428 billion yuan, a year-on-year decrease of 4.80%, an increase of 17.82% over the previous year, and receivables of 024 million yuan, an increase of 99.87% over the previous year. It is expected that it will gradually be confirmed as revenue in the future. Focus on the main radar electronics industry and promote a new pattern of intelligent and energy business development in an integrated manner. The company focuses on the radar electronics industry, smart industry and energy industry. In terms of weather radar: the company has made further breakthroughs in the development of a comprehensive meteorological detection system; in terms of air traffic control radar: the military air traffic control field has expanded from a single aircraft to multiple dimensions such as monitoring systems and maintenance equipment; in terms of warning radar business: Benefiting from the gradual improvement of the national radar warning system, the business is expected to maintain steady growth over the next three years. At the same time, the company is deeply involved in key industries such as civil defense, smart agriculture and energy, promoting an integrated business development pattern and expanding downstream application space for products. The only listing platform for China Telecom Weizi Group continues to be optimistic about the value of the company's platform. China Telecom 38, the controlling shareholder of the company, is China's first-class military and civilian radar development and production base, and has strong comprehensive capabilities in electronic information technology and system engineering. The company continues to expand its radar business by relying on the high-quality assets and resource advantages of 38 CLP Telecom companies. Coupled with the acceleration of internal resource integration within the Bowei Changan sub-group, the company's platform value is prominent as the only listed company under the sub-group, and it may continue to benefit. On October 15, 2019, Guorui Technology, a subsidiary of Sichuang Electronics Co., Ltd., issued an announcement. The major asset restructuring plan was accepted by the Securities Regulatory Commission. With the progress of this restructuring work and the promotion of asset securitization within the Group, the optimal asset allocation of Sichuang Electronics is expected to accelerate. Profit forecast and investment recommendations: We predict that the company will achieve operating income of 47.77/ 59.45/ 7.138 billion yuan in 2020-2022, respectively, an increase of 30.13%/24.45%/20.06%; achieve net profit of 1.45/ 1.81/ 217 million yuan, a year-on-year increase of 30.49%/24.82%/20.00%; corresponding EPS of 0.91/1.14/ 1.36 yuan; PE is 41.00/ 32.85/ 27.37 times Maintain a “buy” rating. Risk warning: military radar bidding falls short of expectations; market competition risk; policy risk.