Company announcement: The company released its 2020 quarterly report. Q1 achieved revenue of 608 million yuan, a year-on-year decrease of 7.54%, net profit attributable to shareholders of the parent company of 87 million yuan, a year-on-year decrease of 9.9%; and realized net profit attributable to shareholders of the parent company after deduction of 408 million yuan, a year-on-year decrease of 6.48%. Performance was in line with expectations and fluctuated due to the impact of the pandemic. The company achieved operating income of 608 million yuan in the first quarter of 2020, a year-on-year decrease of 7.54%; realized net profit of 87 million yuan, a year-on-year decrease of 9.9%; and comprehensive gross margin of 31.4%, a year-on-year decrease of 10.18 pct. On the cost side, the company's sales expenses for the first quarter of 2020 were 108 million yuan, down 34.08% year on year; management expenses were 41 million yuan, up 2.52% year on year; financial expenses were -023 million yuan, down 267.39% year on year; and R&D expenses were 0.9 billion yuan, down 26.64% year on year. The main reason for the decline in the company's net revenue and profit is that the COVID-19 pandemic has affected the development of some businesses; the main reason for the decline in gross margin is the impact of the new satellite launch last year and the increase in satellite depreciation and monitoring and control costs in the current period; the reason for the decline in sales expenses is that marketing activities were postponed due to the impact of the COVID-19 pandemic; in addition, the company held a board meeting on January 3, 2020. In order to improve the efficiency of capital use, the amount of cash management products purchased by the end of March was RMB 250 million. 1,389 billion yuan. Overall, the company is operating steadily and maintaining a growth trend. Satellite Internet was incorporated into the new infrastructure, and the national strategy promoted industrial development. On April 20, the National Development and Reform Commission clarified the scope of the new infrastructure during an online press conference, and the satellite Internet was included in the category of new infrastructure for the first time. The satellite Internet industry chain mainly consists of three parts: satellite manufacturing and rocket launch, ground base stations and terminal equipment, and satellite communication operations. As the only satellite communication operator with autonomous and controllable commercial communication and broadcasting satellite resources in China, China Satellite Communications has a total of 15 commercial communication broadcasting satellites. Its transponder band resources cover the C band, Ku band, and Ka band. Among them, there are about 520 satellite transponder resources in the C band and Ku band, and 26 point beams in the Ka band. The satellite communication broadcast signal covers all of China, Australia, Southeast Asia, South Asia, the Middle East, Europe, Africa and other regions. In 2017, the company successfully launched China's first Ka-band Qualcomm The quantitative satellite Zhongxing 16 has internationally advanced, autonomous and controllable satellite Internet application service capabilities. We believe that in the context of promoting domestic demand and expanding effective investment to drive economic growth, the national strategy promotes the accelerated development of the industry. As an industry leader, the company is expected to fully benefit from industry dividends. It is an effective complement to 5G technology, and there is a large market space for multi-scenario applications. Satellite communication, like mobile communication and terrestrial optical communication, is one of the important methods of modern communication. It has the advantages of wide coverage, large capacity, and high reliability, and is widely used in various fields such as military, commercial, and civilian fields. From the perspective of application scenarios, in the future, new demand such as high-definition programs and “dynamic communication” will drive the development of the satellite communication industry to accelerate. Specifically, high-definition television broadcasting has become the development direction of the radio and television industry, and radio and television stations continue to increase in bandwidth demand for satellite transmission of radio and television programs; satellite communication is the only or most economical communication solution for “dynamic communication”. For shipborne communication, global marine satellite communication bandwidth is seriously insufficient. For airborne communication, the penetration rate of domestic airborne WiFi is expected to increase dramatically in the future. For vehicle-mounted communication, high-throughput satellite signals are more stable The coverage area is wider; at the same time, remote regions and the “Belt and Road” are expected to bring new growth space. Investment suggestion: As the only satellite communication operator with autonomous and controllable commercial communication and broadcasting satellite resources in China, the company has high-quality communication satellite resources and rich frequency orbital resources, has advanced international, autonomous and controllable satellite Internet application service capabilities, and has a high market share. In the future, along with the construction and operation of high-throughput satellites, it will bring new space for the company's performance growth. We expect the company's net profit in 2020-2022 to be 477 million yuan/509 million yuan/545 million yuan, respectively, and EPS of 0.11/0.12/0.12 respectively, maintaining the “increased holdings” rating. Risk warning events: risk of overseas operations; risk of high-throughput satellite market expansion not meeting expectations; risk of competition between different means of communication; risk of macroeconomic cycle fluctuations; market systemic risk