1. Overview of events

The company's operating income in the first three quarters was 3.57 billion yuan, down 18.28% from the same period last year. The company's net profit in the first three quarters was 3.57 billion yuan, down 18.28% from the same period last year. The net profit in the same period last year was 209 million yuan. In the third quarter, the company's revenue was 1.405 billion yuan, an increase of 6.31% over the same period last year. The net profit in the same period last year was 53.198 million yuan.

2. The company has made a turnaround in its operating performance for two consecutive quarters, and its profit situation has greatly improved. In the first and second quarters of 2021, the company's net profit was-149 million yuan and 27.1226 million yuan respectively, especially Q1 was affected by the control of epidemic situation at home and abroad, and there was great pressure on revenue and profit.

In the second half of the year, the company's newly signed orders increased significantly compared with last year, but project delivery was affected by factors such as tight supply of upstream electronic materials, and revenue increased slightly in the third quarter compared with the same period last year.

We believe that with the effective control of the epidemic in foreign countries, the company's business situation has recovered rapidly.

3. The company's overseas orders have increased significantly, and overseas market orders have continued to improve. The number of major contracts announced by the company in 2020 is only 3, and all of them are in the second half of 2020. By October 24, 2021, eight major contracts have been announced (including Shenzhen Metro, Brazilian Federal Road Police, a Central Asian industry partner, Spain Telecom, Shenzhen Nanshan District Government, Brazil State of Bahia (BAHIA), etc.) Compared with the same period last year, orders improved significantly compared with the same period last year, especially in overseas markets, the company's orders continued to recover, indicating that the impact of patent incidents on the company's overseas business has gradually decreased, and overseas market orders are expected to continue to improve.

4. Investment suggestions

Optimistic about the company's leading position in the private network, with the overseas epidemic relief, the company's business is expected to continue to recover, domestic rail transit, 5G, public security network and other demand is also expected to promote the company's fundamentals to improve. To keep the earnings forecast unchanged, the estimated revenue for 2021-2023 is 70.50 trillion yuan, and the earnings per share are 0.220.27,0.32 yuan, respectively. Corresponding to the closing price of 5.64 yuan per share on October 30, 2021, PE is 25.77CP21.1919 17.38 times, maintaining the "overweight" rating.

5. Risk hint

The overseas epidemic situation continues to be repeated, customer orders are not sustainable, the Sino-US science and technology war leads to the instability of the company's supply chain, and the patent dispute with Motorola requires large compensation.