Three quarters reported lower-than-expected revenue and slightly higher net profit than expected. Quarterly net profit fell year-on-year for the first time since it went public in 2010. Revenue in the first three quarters was 180 million yuan, a year-on-year increase of 6.8%, which was lower than our forecast of 20% growth. Net profit was 48.5 million yuan, a year-on-year increase of-18.5%, slightly higher than our forecast growth of-21%. Earnings per share in the first three quarters were 0.15 yuan.

Revenue from image integration declined. The sales revenue of the image integrated system from a certain army in the first three quarters was 88.28 million yuan, down 23.5% from the same period last year. The company expects that the sales revenue from a certain unit will decline significantly in the next six months, which will affect the company's annual performance. The revenue of the smart city business in the first three quarters was 8.33 million yuan, which is not enough to offset the declining revenue pressure of the image integrated system.

Enter a new stage of development. The revenue growth from listing to 2013 mainly comes from the image integrated system, and the revenue growth depends on a single major customer, which is the first stage of development after listing. Entering the second stage of development after listing in 2014, the company seeks a broader customer base and business base. Expand the customer base by tapping the market opportunities of advantageous industries with industry key customer benchmarking projects. Enrich the business line through the layout of smart city, online classroom, online piano education, excellent medicine, digital operating room, smart family and other new business areas. In addition, this year, Huaping also participates in Beijing Conrad Medical equipment Co., Ltd and Shanghai Huashi Beijing Network Technology Co., Ltd. The layout intention in the field of education and health care is very clear. The company disclosed in the third quarterly report that the online piano education website, the first-generation digital operating room products and smart family terminal products will all be launched or released in the fourth quarter of this year. Warburg Pincus's new and old businesses fell apart in 2014: while smart cities, online classrooms and digital operating rooms are likely to be the first to reach a certain revenue scale, they will not be able to completely replace the lost revenue from the image integrated system this year.

Downgrade revenue and net profit forecasts and maintain overweight ratings. According to the three quarterly reports, the revenue of the image integrated system will decline significantly in the next six months compared with the same period last year. We have lowered the revenue of this business to 120 million yuan in 2014, as well as the revenue assumptions for new businesses such as video conferencing systems and digital operating rooms. We lowered 2014-2016 income from 3.8,4.4,7.2 to 2.6,3.4 and 480 million yuan respectively, and net profit from 1.4,1.6,2.3 to 0.9,1.2 and 180 million yuan respectively, and earnings per share were 0.27,0,35 and 0.54 yuan respectively. In view of the significant decline in the share price, we maintain our "overweight" rating. In the new business layout stage, the weakness of the original business and the expectation of investors for the new business may keep the company's price-to-earnings ratio at a high level, while the stock price fluctuates sharply.