The results in the third quarter of 2011 were lower than expected, EPS=0.38 yuan per share. In the first three quarters, the company achieved operating income of 249 million yuan, a decrease of 21% over the same period last year, and a net profit of 45.76 million yuan, a decrease of 39% per share.

The delay in revenue recognition led to a slowdown in growth and an increase in expense rates during the period. Due to the impact of the overall macro environment, the delivery of some contracts was delayed, resulting in delayed revenue recognition and a significant 71.5 per cent increase in inventory (inventory growth of finished goods and procurement of spare parts such as IC). Although the gross profit margin has always been stable between 57-58%, there is a mismatch between expense and income growth during the period, resulting in a sales expense rate of 29% and a management expense rate of 25% in the first three quarters, resulting in a faster decline in net profit than income. We believe that with the arrival of the peak season of traditional shipping and settlement in the fourth quarter, 2011 revenue will remain stable, but the increase in expense rates will lead to negative short-term performance growth.

Infoto is a middle and high-end brand manufacturer in the field of video surveillance in China, with outstanding system integration and customization ability.

The company has a relatively complete public security electronic product line and marketing channels at home and abroad, which are the core competitiveness of the company and adopt the growth model of product line × channel. The company has obvious brand advantages, technical capabilities and rich industry application experience, outstanding ability of system design, integration and customization, and will be able to share the high growth cake of the security electronics industry in the future. At the same time, the company has obvious advantages and great potential in large-scale projects such as "Ping an City", and its market share is expected to increase rapidly.

With 1.8 billion yuan in cash at the end of the period, I look forward to great-leap-forward development in the future. The company uses 510 million yuan to raise funds, focusing on the research and development of new products and new technologies, production capacity expansion in the next three years, and the construction of domestic and foreign marketing network channels. In addition, we believe that the company's over-raised capital of 1.35 billion yuan may timely achieve the superposition effect of the product line and the regional complementary expansion of marketing channels through the extension of M & An expansion, which is conducive to further enhance the competitive advantage of system integration + customization as the core.

Downgrade earnings forecast and maintain "overweight" rating. Taking into account the local government's financial expenditure capacity and the company's continued investment in R & D and marketing, we downgrade our profit forecast for 2011-2013 to 0.43 shock 0.69 shock 1.02 yuan (originally 0.72 pound 1.48 yuan). We continue to be optimistic about the company's system integration + customization capability and product line × channel growth model, continue to maintain the "overweight" rating, and suggest that investors actively pay attention to the progress in the use of over-raised funds and new orders for new projects.