Incident: The company issued a “Notice on Signing Major Contracts” and recently signed a military product order contract with a customer. The subject of the contract was a certain type of military drone. The contract amount was RMB 219.238 million, accounting for 54.98% of total revenue in 2019. Key investment points: Drones have received another large order, and the cumulative amount of orders for military products on hand has already exceeded last year's full year's revenue. Including this contract, the total amount of new orders signed by the company during the year has reached 362 million yuan, with a cumulative total of 442 million yuan of on-hand orders, exceeding the revenue scale of 399 million yuan for the full year of last year. Among them, on-hand orders for drones reached 305 million yuan, and on-hand orders for certain types of satellite communication terminals reached about 110 million yuan. The military unmanned system is the company's biggest strategy and is expected to continue to benefit from the increase in the intensity and frequency of practical military training and the vast market brought about by the trend of unmanned equipment. 1) Unmanned target aircraft bear the responsibility of the “Blue Army in the Air” and are mainly used to simulate enemy air attack targets. They are the core means of air defense training for military forces, and are in wide demand in military classes and war zones, such as sea, land, and air. The company's drone products have now formed a total of five product systems covering low speed, medium speed, and high speed. The core avionics supporting products such as navigation, communication, and control are all independently developed, and have a high degree of intelligence and localization, and have strong market competitiveness. As the frequency and intensity of practical training continues to increase, the unmanned target aircraft business is expected to continue to grow at a high rate. 2) In terms of unmanned vehicle equipment, the company has leading technical advantages and industrialization capabilities in the field of military teams securing transportation and reconnaissance of unmanned vehicles. The US and Russia are already equipped with tens of thousands of military unmanned vehicles of all types. According to the US and Russia, domestic demand is also expected to reach tens of thousands of units. The market capacity is at the level of 10 billion yuan. The company's business is progressing smoothly, and it has already won orders in the 10 million yuan scale. Intelligence and unmanned operation are future war trends. It is expected that the proportion of intelligent unmanned equipment deployed in our military will continue to increase, and the company will benefit in the long term. Satellite communication and navigation services are plentiful and underdeveloped, and the leading edge is obvious. 1) The company is a leader in Dongzhongtong and will benefit from the transformation of military satellites and the vigorous development of satellite internet. Currently, military satellite communication systems are in a new cycle of co-feedback and upgrading from a single band to dual band, and the company's military products business is expected to achieve a new round of high growth; in the civil sector, satellite internet has been incorporated into new infrastructure, and policies have been introduced in many places to promote the development of satellite Internet supporting industries. In the future, a large number of nodes will be connected to satellite communication networks, bringing broad market demand to Dongzhongtong. Furthermore, the company has already entered the civil shipping sector and is cooperating with China Mobile and ZTE to promote offshore fishing vessel applications. 2) In the field of inertial guidance, the company has achieved a full industry chain layout from core devices to solutions, and has developed a combined navigation system in conjunction with Beidou satellite navigation to meet the needs of different fields. In the military direction, it mainly targets intelligent ammunition and provides intelligent navigation modules for various types of missiles and shells. In the direction of civilian use, the focus is on supporting driverless cars. It has been applied in small batches on the first L4 class autonomous mass production vehicle in China. The penetration rate of the company's products in the domestic market is about 60%, forming a significant leading advantage. Profit forecasting and investment ratings: Maintaining buying ratings. The company's intelligent unmanned systems continue to receive orders, and the rapid growth trend is clear; the Dongzhongtong business has achieved batch ordering of military products, and has deployed satellite internet and expanded shipborne applications. The company expects net profit of 28 million to 38 million yuan for the first half of the year, an increase of about 15 to 21 times over the previous year. As the company continues to break through in various businesses, especially the intelligent unmanned business, performance is expected to continue to grow at a high level. It is estimated that net profit for 2020 to 2022 will be 146 million yuan, 195 million yuan and 239 million yuan respectively, corresponding to EPS of 0.96 yuan, 1.28 yuan and 1.56 million yuan respectively, corresponding to the current stock price PE of 43 times, 33 times and 27 times, respectively, maintaining the buying rating. Risk warning: 1) the development of unmanned systems falls short of expectations; 2) satellite internet construction falls short of expectations; 3) military bidding and procurement falls short of expectations; 4) systemic risks.