Company announcement: when the company released its semi-annual report for 2020, its revenue in the first half of the year was 1.261 billion yuan, down 3.94% from the same period last year, and the net profit of shareholders belonging to listed companies was 191 million yuan, down 8.33% from the same period last year.

The performance was in line with expectations, returned to growth month-on-month, and fluctuated year-on-year affected by the epidemic. In the first half of 2020, the company achieved operating income of 1.261 billion yuan, a decrease of 3.94% over the same period last year, a net profit of 191 million yuan, a decrease of 8.33% over the same period last year, a comprehensive gross profit margin of 31.95%, a decrease of 8.24pct over the same period last year, and a month-on-month increase in 0.55pct.

Of this total, 2020 Q2 achieved revenue of 652 million yuan in a single quarter, down 0.32 percent from the same period last year, up 7.22 percent from the previous quarter, and achieving a net profit of 104 million yuan from the same period last year, down 6.99 percent from the same period last year and up 20.42 percent from the previous year. From the expense point of view, the company's R & D expenditure in the first half of 2020 was 20 million yuan, down 8.76% from the same period last year, of which 2020Q2 R & D expenditure per quarter was 12 million yuan, up 11.77% and 32.79%, respectively. The management cost in the first half of 2020 was 79 million yuan, down 11.39% from the same period last year, and sales expenses were 18 million yuan, down 30.58% from the same period last year. The main reason for the decline in the company's revenue performance in the first half of the year was that the epidemic affected business development, while some overseas customers did not renew their contracts after the expiration of their contracts due to their own business adjustments, superimposed on the new satellite launch in 2019, and the impact of increased satellite depreciation in the current period. Quarter by quarter, the company resumed business growth in the second quarter, and revenue and net profit increased compared with the previous quarter. On the whole, the company operates steadily and maintains the growth trend.

Satellite Internet will be incorporated into the new infrastructure and actively open up the business market. On April 20, the National Development and Reform Commission made clear the scope of the new infrastructure at an online news conference, bringing satellite Internet into the scope of the new infrastructure for the first time. The company is the only satellite communication operator in China with self-controlled commercial communication and broadcasting satellite resources. as of June 30, 2020, it has operated 15 commercial communication and broadcasting satellites, including C-band, Ku band and Ka band, among which there are about 520 satellite transponders in C-band and Ku band and 26 spot beams in Ka band. Satellite communications and broadcasting signals cover the whole of China, Australia, Southeast Asia, South Asia, the Middle East, Europe, Africa and other regions. In the first half of the year, the company actively opened up the business market, successfully completed the broadcast of the "two sessions" and realized the live broadcast application of "5Gateway 8K + satellite" for the first time in the country. Xin Nuo, a wholly-owned subsidiary, officially launched the "Sea Star" high-throughput satellite ocean service products to help optimize and upgrade the marine satellite communications industry. Realize the maiden flight of China's first Ka broadband satellite Internet aircraft, and promote the business landing and market expansion of Ka airborne broadband satellite Internet business. In terms of customers, the company successfully won the bid for the CCTV Olympic HD channel project, helped the country to start the era of live satellite household access in HD, and signed the Thai Communications Satellite Company project, which is an important breakthrough in the development of business in the Indo-China Peninsula.

With the effective supplement of 5G technology, there is a large market space for multi-scene applications. Satellite communication, like mobile communication and ground optical communication, is one of the important ways of modern communication, which has the advantages of wide coverage, large capacity and high reliability, and is widely used in military, commercial, civil and other fields. From the perspective of application scenarios, new requirements such as high-definition programs and "moving ZTO Express" will accelerate the development of the satellite communication industry. specifically, high-definition programs will become the development direction of the radio and television industry. radio and television stations have an increasing demand for bandwidth for satellite transmission of radio and television programs. Satellite communication is the only or most economical communication solution for "moving ZTO Express". For shipborne communication, the global marine satellite communication bandwidth is seriously insufficient, for airborne communication, the domestic airborne WiFi penetration rate is expected to increase greatly in the future, and for vehicle communication, high-throughput satellite signals are more stable and cover a wider range; at the same time, remote areas and "Belt and Road Initiative" are expected to bring new growth space.

Investment suggestion: as the only satellite communication operator with self-controllable commercial communication and broadcasting satellite resources in China, the company has high-quality communication satellite resources and rich frequency orbit resources. with international advanced, independent and controllable satellite Internet application service capability, high market share. With the construction and operation of high-throughput satellites in the future, it will bring new space for the company's performance growth. We expect the company's net profit from 2020 to 2022 to be 477 million yuan / 509 million yuan / 545 million yuan respectively, with an EPS of 0.11 and 0.12, respectively, maintaining the "overweight" rating.

Risk reminder events: the risk of overseas operation; the risk that the expansion of high-throughput satellite market does not meet expectations; the risk of competition between different means of communication; the risk of macroeconomic cycle fluctuation; the systemic risk of market