Company announcement: the company released its three-quarter report in 2020, with revenue of 1.909 billion yuan in the first three quarters, down 1.17% from the same period last year. The net profit of shareholders belonging to listed companies was 336 million yuan, an increase of 9.68% over the same period last year. After deducting 260 million yuan, the net profit of shareholders belonging to the parent company decreased by 11.73%.

The performance is in line with expectations and continues to increase investment in research and development. The company achieved revenue of 649 million yuan in the third quarter, an increase of 4.69% over the same period last year, a decrease of 0.57% from the previous month, and a net profit of 145 million yuan from the same period last year, an increase of 48.1% from the same period last year, an increase of 38.65% over the same period last year, and a net profit of 103 million yuan deducted from the same period last year, an increase of 7.3% over the same period last year, a month-on-month increase of 43%, a gross profit margin of 36.47%, an increase in 3.94pct and an increase in 4pct. From the cost point of view, the R & D cost of 2020 Q3 in a single quarter was 19 million yuan, up 85.74% from the same period last year, 64.36% from the previous year, 10 million yuan from the same period last year, down 25.57% from the same period last year, up 0.36% from the previous year, and management expenses was 44 million yuan, up 9.59% from the same period last year. 14.22%, financial expenses were 9 million yuan, 158.87% and 15.16% respectively. The company's business remained stable in the first three quarters, fluctuated due to the impact of the epidemic, and some marketing activities were cancelled or postponed. The main reason for the increase in net profit in the current period is the increase in income from the purchase of bank short-term wealth management products, with an investment income of 59.9878 million yuan. In addition, the company continues to increase investment in research and development, reserve technical strength in areas such as satellite Internet, and enhance the overall competitiveness of the satellite application industry. On the whole, the company operates steadily and maintains the growth trend.

Take the lead in the establishment of Star Airlines interconnection and actively expand satellite Internet business. The company announced on September 25 that it plans to set up Star Navigation Interconnection (Beijing) Technology Co., Ltd. with its own capital of 75 million yuan and Guohua Satellite Fund, of which China Satcom accounts for 75% of the total registered capital of Star Interconnection. Guohua Satellite Fund is actually controlled by Aerospace Science and Technology Group. Star Interconnection is intended to be mainly engaged in aviation Internet services based on broadband satellites, providing broadband satellite access and Internet information services for the aviation field. The company successfully realized the maiden flight of China's first Ka broadband satellite Internet aircraft in July this year, promoting the business landing and market expansion of Ka airborne broadband satellite Internet. The establishment of Star Airlines Interconnection will help to promote the strategic transformation of the company and actively expand the satellite Internet business.

On April 20 this year, 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 with self-controlled commercial communication and broadcasting satellite resources in China. It operates a total of 15 commercial communication and broadcasting satellites. The transponder band resources include 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.

Satellite communication is an effective supplement to 5G technology, and 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