Performance review The results for the first quarter of 2019 and 2020 are in line with the scope of the performance forecast. Donghua Software announced its business for the first quarter of 2019 and 2020. Revenue in 2019 was 8.85 billion yuan, up 4.5% year on year; net profit was 580 million yuan, down 27.6% year on year. Revenue for the first quarter of 2020 was 1.73 billion yuan, up 5.4% year on year; net profit was 160 million yuan, up 2.4% year on year. The company's performance was basically in line with the forecast range. Trend business continued to expand, and “Peng Xiao” helped achieve growth in the first quarter. In 2019, the company maintained steady growth in all major business areas, and 81 smart hospital users were added to the medical industry, including 32 level-III hospitals; Health Love Internet Hospital provided health management services to patients in more than 100 of the top three hospitals in the country. The financial industry's consolidated old customers have also gained new customers such as the Bank of Hubei and Bank of Central Plains, and the market share has further increased. In January 2020, the company and Huawei jointly released the “Pengxiao” server and applied it for the first time on the Ningbo Municipal Affairs Cloud. The company indicated that the current implementation of the “Pengxiao” production line and market layout are progressing in an orderly manner, which has had a positive increase in performance in the first quarter of 2020 to a certain extent. Go deep into the frontline of the fight against the epidemic and gain industry reputation. During the epidemic, in order to actively support the informatization construction of emergency hospitals for epidemic prevention and control in various regions, Donghua Medical completed the construction of information systems for Huoshenshan and Leishenshan hospitals within 15 days; completed the information system transformation of Beijing Xiaotangshan Hospital in March; launched 18 functional modules within 20 days, and imported 6 types of basic data. We believe the company's work during the pandemic demonstrated its solid technology and ability to deliver quickly. In March, the company built an Internet diagnosis and treatment system for the Beijing Hospital of Traditional Chinese Medicine to provide closed-loop services for patients with chronic diseases with remote registration, consultation, diagnosis, prescriptions, and drug distribution. It keeps up with the inflection points that have emerged in the industry under the epidemic and seize Internet medical opportunities. Orders have picked up, and all industries have made gains. Bidding for information integration projects in various industries has been delayed during the pandemic due to the pandemic, but the trend has improved since late February. In 2-4 months, the company successively received tens of millions of orders, including the Qinhuangdao Bank software and hardware procurement project in the financial sector, the Sanya municipal affairs cloud project in the government sector, and the CNOOC cloud platform construction project in the energy sector. We believe that at present, the company's on-going orders are still quite abundant, providing a guarantee for revenue growth in the next few quarters. Profit forecasting and valuation. Considering the impact of the pandemic on the company's project bidding, implementation and settlement, the 2020/21 revenue forecast was lowered by 9%/10% to 116.7/14.92 billion yuan, and the 2020/21 net profit forecast was lowered 14% to 11.6/1.35 billion yuan. Maintaining an outperformance of the industry, the target price was lowered by 14% to 18 yuan. Based on 50 times the 2020 price-earnings ratio, there is room for growth of 41% compared to the current stock price. The current stock price corresponds to 35/30 times the 2020/21 price-earnings ratio. Project implementation and bidding were delayed due to the risk epidemic, and the “Peng Xiao” marketing promotion fell short of expectations.