Incident: On July 6, 2020, the company received a notice of winning the bid. The consortium formed by the company and the participating subsidiary Meishan Huantian Smart Technology Co., Ltd. (the company holds 30% of Huantian Smart) was identified as the winning bidder for the smart street light public procurement project. The winning bid amount was 160 million yuan. The number of multi-pole smart street lights purchased was 4,557 sets, and the delivery service period was 150 days. Comment: 1. Under the wave of new infrastructure and 5G in 2020, smart light poles have become “widespread” to help smart city construction. 2020 is the year of the outbreak of 5G. It is a year where new infrastructure concepts are clarified. Smart light poles integrate ICT technologies such as AI, cloud computing, and big data, and support various functions such as smart lighting, weather stations, air quality detection, urban Wi-Fi coverage, video surveillance, charging piles, LED information release, information interaction, one-click alarms, and 4G/5G base stations. It is the best carrier for 5G small and micro station site additions and smart city data entry. As an outdoor lighting leader in the entire industry chain, the company has a good opportunity for multi-party cooperation and development under the “product+operation” model. The company is one of the largest comprehensive urban lighting service providers in China, and one of the first leaders to enter smart light poles. It lays out the entire industry chain with a first-mover advantage, including various aspects such as program planning and design, street lights, light poles and integration, and engineering project implementation, and expands the smart city business from “smart street light hardware” + “smart city software platform”. Furthermore, the company cooperated with many parties to accelerate the development of smart light pole technology and project implementation. The company and the University of Electronic Science and Technology launched a joint laboratory to develop new smart street light applications. Multiple technologies and R&D achievements have increased product added value and technological content to ensure the company's core competitiveness in the field of smart light pole operation; joined the Huawei eLTE Ecological Alliance in 2018 to create the first smart street light “Victor” developed based on eLTE-IoT technology in China. In 2019, it also won a joint bid with Tencent Cloud for the 870 million Chengdu Smart Greenway project; it also established strategic partnerships with Inspur Software and Hikvision to join the US Xillinx (Xillinx) Partner programs. With policy support and a first-mover advantage, the company seizes opportunities to strengthen technology research and development, business development and healthy cooperation to help accelerate the company's development. 2. The company leads the industry in order scale. The continuous implementation of projects has helped the company to clarify its operating model and expand its business, and has once again won large bids to help the company's business reach new heights. In 2019, the company sold a total of 8999 smart street lights, an increase of 292.46% over the previous year, and achieved revenue of 954.404 million yuan, an increase of 102.22% over the previous year. According to the company's official website, from July 2016 to April of this year, 24 smart light pole projects have been implemented, including the country's first smart light pole operation project - the Lijiang Project, the first smart street light demonstration section in Changsha, etc., as well as the Linyin Road - Yanjiang Road Smart Avenue in Yingtan City, Jiangxi Province, which took 3 months to complete in February this year, and the upgrade of Sanshenghua Township in Chengdu, which landed in April this year. Accelerated project implementation helped further develop the company's product R&D and design, engineering project implementation and operation management, and enhance the company's strength and core competitiveness. At the beginning of the second half of the year, the company once again won a large bid of 160 million yuan, purchasing 4,557 sets of smart light poles, and this order is the first order for 64,000 sets of multi-functional smart street lights in Meishan. It is expected that large orders will continue to be placed in the second half of the year. 3. The participating subsidiary is a state-owned holding company in Meishan City, Sichuan. Huati Technology, which has rich industry experience, participated in the shares to achieve a win-win situation and help subsequent smart light poles build a larger smart city layout. The participating subsidiary Meishan Huantian Smart Technology Co., Ltd. was established on April 26, 2020. The largest shareholder is Meishan Huantian Culture Communication Co., Ltd., holding 51% of the shares, which is 100% indirect controlled by the Meishan State-owned Assets Supervision and Administration Commission; the second largest shareholder, Huati Technology, holds 30% of the shares. The establishment of Huantian Intelligence was formed on March 4, 2020 by the Meishan Tianfu New Area Management Committee, which authorized Meishan Huantian Culture Communication Co., Ltd., a subsidiary of Meishan Tianfu New Area Investment Group Co., Ltd., to invest, build and operate smart street lighting projects in the Meishan Tianfu New Area and introduce social enterprises with financial strength, professional technology, and rich experience in industry operation and management. According to the tender notice, 64,000 sets of multi-functional smart street lights will be built in the Meishan Tianfu New Area area, with a total investment of about 500 million yuan. The first phase will invest 5,000 multi-functional smart street lights in the Shigao region, with an investment of about 43 million yuan in smart equipment; wait until the first phase is implemented and perfected, and then gradually promoted to the Tianfu New Area in Meishan; a total investment of 64,000 sets of multi-functional smart street lights and smart equipment will be invested about 500 million yuan. The company has professional technology and rich industry experience. It has participated in Huantian Wisdom to achieve a win-win situation, accelerate the professional construction of smart light poles in Meishan, and help build smart cities. 4. Profit forecast and investment suggestions: We expect the company to achieve revenue of RMB 1,106/16.41.210 billion from 2020 to 2022, net profit to mother of 1.64/2.37/292 million yuan, EPS of 1.60/2.32/2.87 yuan, corresponding PE 26/18/15 times. Considering that under the influence of the epidemic in the first quarter, the company's performance was still growing rapidly. Driven by demand for new infrastructure and 5G small and micro station sites, the company may enter a period of large-scale expansion of performance and maintain the company's “Highly Recommended” rating. 5. Risk warning: The project contract has not yet been signed, there is uncertainty; the impact of the epidemic; the progress of the smart street light project falls short of expectations; the increase in the company's market share falls short of expectations; and the decline in gross margin.