On November 3, Fangzheng Technology announced the results of its 2008 three-quarter report. In the first three quarters of 2008, the company achieved operating income of 660 billion yuan, a year-on-year decrease of 1.95%; achieved gross profit of 536 million yuan, a year-on-year decrease of 3.16%; realized operating profit of 123 million yuan, a year-on-year decrease of 28.92%; and realized net profit attributable to owners of the parent company of 94.01 million yuan, a year-on-year decline of 34.56%, and basic EPS of 0.05 yuan. Looking at the third quarter in a single quarter, the company's revenue was 201 million yuan, up 3.98% and 16.76% year on year, respectively; gross profit increased 15.91% and 12.87% year on year, respectively; and net profit attributable to parent company owners was 1.34 million, down 97.53% and 97.14% year on month. The company's performance revenue for the first three quarters declined year on year. The main reason was that PC business revenue declined year over year and PCB business revenue increased. When the combined results of the two results reduced the company's total operating income, gross margin increased 1.13 percentage points year over year. There was a slight year-on-year increase in revenue in the third quarter. The main reason for the sharp decline in net profit (all indicating net profit attributable to the parent company) was the sharp increase in sales expenses and financial expenses. Revenue in the third quarter was basically flat, and the PCB business contributed significantly. The company's main business revenue mainly comes from PC business (about 86% of total revenue), PCB business (about 12% of total revenue), and office supplies business (accounting for less than 1%). We estimate that the PC business declined about 7% year over year in the first three quarters, and the PCB business increased 63% year over year. During the reporting period, the global economy declined and China's economic growth slowed, and consumer demand showed a downward trend, which prompted the growth of the domestic PC market to slow down. Competition in the PC market was very intense, leading to a decline in the company's PC sales revenue. The notebook business has increased its share in the PC industry, but the notebook business currently accounts for relatively little of the company's sales volume, and the company is increasing its investment in the notebook business. The growth in the PCB business is mainly due to the gradual commissioning of the company's Zhuhai Fangzheng PCB Industrial Park, investment in new production lines, and an increase in the proportion of HDI products with high profit margins. Considering the slowing growth rate of domestic PCB demand, we expect the company's PCB business growth rate to reach more than 50% this year. The PCB business increases the overall gross profit margin of products. The comprehensive gross margin of the company's products reached 9.57% in the first three quarters, an increase of 13.35% over the previous year. We believe that the gross margin of the PC business has declined slightly, and the gross margin of the PCB business has remained stable, but the increase in the share of the PCB business has raised the overall gross margin level. We believe that the main reason for the decline in corporate PCs is the decline in product prices. As the concentration of the PC industry tends to increase, the company's current competitive position can guarantee that its gross margin will not decline drastically in the next few years. In the long run, the price of PCB products shows a downward trend, but as the share of HDI products with high gross margins in the PCB business continues to rise, we expect that the decline in the company's PCB business gross margin will be contained, and there may even be a slight increase. Considering the rise in depreciation costs, there is not much room for improvement. Cost control needs to be strengthened. In the third quarter, the company's sales expenses and management expenses increased by 206% and 7.43% year on year, and increased by 26.99% and 29.16% year on year in the first three quarters. The growth rate far exceeded revenue growth. The sharp increase in sales expenses is mainly due to the company's increased market channel construction and marketing promotion efforts, and increased investment in notebooks. We believe that sales expenses are growing too fast, and that the company needs to rationally allocate resources and formulate more effective cost plans. The sharp increase in management expenses in the first three quarters was due to the commissioning of the new HDI plant and the increase in other operating expenses. In the first three quarters, the company's financial expenses increased by 71% year on year. The main reason was the expansion of the PCB production scale, which increased the demand for working cash and equipment procurement funds. During the reporting period, the company's short-term debt increased by 396 million yuan to 1,091 million yuan, and long-term liabilities increased by 195 million yuan to 196 million yuan, which ultimately led to a significant increase in interest expenses. Maintain a “neutral” rating. We expect the company's EPS from 2008 to 2010 to be 0.082 yuan, 0.103 yuan, and 0.122 yuan, respectively. Given that the domestic PC industry is maturing and there is still uncertainty about the release of the company's PCB production capacity, we maintain a “neutral” investment rating. Major uncertainties. Competition in the PC industry remains fierce; HDI production may be slower than expected; both the PC business and the HDI business will face the risk of falling market demand.