This report is read as follows:

The company has reached a turning point in both communication business and game business. The game business relies on the core IP to create a series of high-quality content. Communication business benefits from the peak of 5G construction while relying on on-hand resources to quickly develop intelligent government business.

Main points of investment:

Maintain the target price of 12.04 yuan, maintain the overweight rating. The company's communications business ushered in the peak of 5G construction, the game business is expected to launch heavy IP products one after another, the asset quality of the superimposed company has improved significantly, and the company is expected to usher in a double rebound in games and communications business. Maintain 2020-2022 EPS 0.20, 0.42, 0.46 yuan, target price 12.04 yuan, maintain overweight rating.

Event: the company announced that in the semi-annual report of 2020, 2020H1 achieved operating income of 213 million yuan, down 9.56% from the same period last year; net profit from home was 17.778 million yuan, down 12.38% from the same period last year; the company had fewer new 2020H1 games products, and the communications business was also under pressure due to the epidemic, and the overall performance declined slightly in line with expectations.

Short-term performance is under pressure, waiting for big work to go online. The company's communications business is based on planning business, expand smart cities and other areas, superimposed 5G construction peak is expected to pick up. In the game business, the company adheres to the strategy of building boutique games around the well-known IP, 2020H1's product "Wonderland Legend:

The new version of Renaissance has been promoted online, and the company has developed its own mobile tour, the Legend of Wonderland: the birth of a New Generation.

An agency agreement has been signed with Gravity and byte beat Co., Ltd., and will be launched in H2 in Hong Kong, Macao, Taiwan and Southeast Asia. We believe that "the birth of a new generation" is expected to make a rich contribution to the company by virtue of the huge flow dividend of byte beats and the "guardian eternal love" of the same IP products developed by the company. At the same time, the company actively promotes the overseas promotion of products such as "Dream Dragons" and "Wonderland Legend RO: revival", and plans to complete the research and development of 1 or 2 new game products in the second half of the year, laying a good foundation for sustained growth.

Catalyst: smart City business orders landed, new game products launched after the high start-up

Risk tips: intensified market competition, game product development and operation is not as expected, policy risk