The company released its 2022 three-quarter report. 2022Q1-3 achieved operating income of 2,977 billion yuan (-8.88% YoY) and net profit of 268 million yuan (+7.51% YoY). Revenue fluctuations were mainly due to changes in accounting standards, and overall operations were in line with expectations. The laser business has accelerated volume growth. The superconductor business will contribute revenue next year after reaching a milestone in the commissioning ceremony and signing a new large order. Traditional sectors such as backlighting have shrunk as scheduled, intelligent controllers have been relocated to improve efficiency, and overall equity investment has been steady. Maintain the company's net profit forecast for 2022/23/24 at 393/5.65/852 million yuan, respectively. The current stock price corresponds to 34.3/23.8/15.8 times PE. We have adjusted the valuation of each sector segment. It is estimated that intelligent controller/cable/laser/other/equity investments will each contribute 37.4/5.8/63.0/1.4/84.8 billion yuan in market value in 2022, with a total market value of 19.2 billion yuan, still corresponding to the target price of 42 yuan, maintaining the “buy” rating. Revenue fluctuations are mainly due to changes in accounting standards, and overall operations are in line with expectations. 2022Q1-3 achieved operating income of 2,977 billion yuan (-8.88% YoY) and net profit of 268 million yuan (+7.51% YoY), corresponding gross margin of 13.44% (+2.30pcts YoY). 2022Q3 achieved operating income of 772 million yuan (-40.48% YoY, -22.20% QoQ), net profit of 89 million yuan (-8.35% YoY, -23.53% QoQ), and corresponding gross margin of 18.08% (+8.32pcts YoY, +4.22pcts QoQ). The sharp year-on-year decline in the company's revenue was mainly due to the adoption of new revenue recognition standards in the fourth quarter of 2021, and revenue recognition for future material processing and other businesses was changed from the total amount method to the net value method, thereby reducing part of the revenue recognition. Furthermore, the company also actively reduced the business scale of traditional sectors such as backlighting, which also had a certain impact on the month-on-month growth rate of operating income. The overall cost side of the company increased slightly. The 2022Q1-3 sales/management/finance/R&D expense ratio was 1.89%/8.74%/0.00%/3.76% respectively, compared with 2022 H1+0.16pct/1.00pct/-0.02pct/-0.02pct/+0.19pct. The sales and management expense ratio increased slightly due to product marketing, plant relocation, etc., the financial cost ratio continued to decrease, and R&D investment was stable. The company's net interest rate continued to rise, and the 2022Q3 recorded 15.25% (+6.39pctSyOY, +0.62pct QoQ). Profitability continued to increase despite declining revenue. The laser business is accelerating volume growth. The laser business continued to grow rapidly in the third quarter alone, achieving main revenue of 50 million yuan (+423.44% YoY), net profit of 13 million yuan (+1110.14% YoY), net sales profit of 25.47%, and a net sales profit margin of 25.47%. The laser sector accelerated volume growth, and profitability continued to improve. The company's laser sector mainly contributes revenue from pump source devices and optical fiber integrators, with a full production value of 350 million yuan throughout the year. Currently, production is at full capacity. Due to slight delays in revenue confirmation, it is expected to achieve revenue close to 300 million yuan throughout the year. Laser products are waiting to be installed domestically, and against the backdrop of an increasingly severe international security environment, there is plenty of room for overseas demand. Future volume is expected to greatly accelerate the growth of laser business revenue. The superconductivity business ushered in a milestone. Recently, a major order was signed, which will contribute revenue next year. On September 26, the company held the commissioning ceremony of the world's first MW class high-temperature superconducting induction heating device at Harbin Chinalco Dongqing Company, and plans to hold the second batch of ceremonies in mid-November. This marks the formal commercialization of high-temperature superconducting technology. The company's superconductivity business has passed various inspections, and began participating in the formulation of national technical standards in July 2022, and obtained the energy saving and emission reduction certification of the Shanghai Energy Efficiency Center in August 2022. Superconducting technology is currently at the world's pioneering level, has no competitors yet, and has been commercialized and tested. According to the company announcement, in addition to Chinalco Dongqing, the company currently has orders for more than 10 units; on November 4, the superconducting subsidiary also signed a cooperation agreement with Guangya Aluminum Co., Ltd., which will gradually promote the application of superconducting equipment in Guangya Aluminum's aluminum extrusion production line; Guangya Aluminum currently has 58 aluminum extrusion production lines, which will still increase production capacity, and there is plenty of room for future equipment applications. The company's superconducting equipment has been delivered, and revenue will probably be confirmed in 2023. In the future, it will also expand into new fields such as metal smelting and crystalline silicon heating, with broad growth prospects. Traditional sectors such as backlights have shrunk as scheduled, intelligent controllers have been relocated to improve efficiency, and overall equity investment has been steady. In the traditional sector, sectors with low gross margins, such as backlights and cables, continued to shrink, and the divestment and transfer of the backlight business was carried out according to plan. The intelligent controller business completed the construction and relocation of Hualian (Xiang'an) Industrial Park; 3Q22 Hualian Electronics achieved revenue of 507 million yuan (-1.50% YoY), mainly due to the decline in demand in the home appliance market, and realized net profit of 48 million yuan (+36.74% YoY), mainly due to the transformation of high-end products and improved management efficiency after relocation; according to the company announcement, the production capacity of the intelligent controller business is sufficient in the future. The products are gradually transforming into high-margin fields such as smart homes and new energy vehicles, and it is expected that the company's profitability will continue to increase. 3Q22 Company's net investment income was 92 million yuan (-8.83% YoY, -5.14% QoQ), mainly due to delays in revenue confirmation from Northern Communications, which affected part of earnings. It is expected to pick up in the future. Hongfa Co., Ltd., which accounts for a high share of investment income, operates steadily and will guarantee equity investment income. Risk factors: Competition in traditional businesses such as intelligent controllers has intensified; backlight business transfer progress and profit and loss have exceeded expectations; the overall contribution revenue of the laser business has fallen short of expectations; and the confirmed revenue of the superconducting business is slower than expected. Profit forecast, valuation and rating: The company's performance and the overall growth of various business segments are in line with expectations. We maintain the company's net profit forecast for 2022/23/24 at 3.93/5.65/852 billion yuan, respectively. The current stock price corresponds to 34.3/23.8/15.8 times PE. Considering the different sensitivity of the company's different business segments to valuation, we adjusted the valuation of each sector segment and adjusted the market value forecast for intelligent control/cable/laser/other/investment income contribution from 32.9/7.0/49.9/1.2/10.17 billion yuan to 37.4/5.8/63.0/1.4/84.8 billion yuan. Adding up the valuation of each division, the company obtained a reasonable market value of 19.2 billion yuan, while still maintaining the target price of 42 yuan and the “buy” rating.