Event: the company recently announced its third quarterly report: in the first three quarters, the company realized operating income of 2.446 billion yuan, down 10.69% from the same period last year; and realized net profit of 98.0179 million yuan belonging to listed companies, an increase of 0.15% over the same period last year. In the third quarter, the company's revenue was 979 million yuan, down 46.24% from the same period last year; the net profit belonging to listed companies was 9.9529 million yuan, down 42.94% from the same period last year. Comments:

The expansion of the private network market is slow, not as expected, and the financial electronic business continues to grow. The company's revenue in the third quarter was 979 million yuan, down 46.24% from the same period last year, and the net profit belonging to listed companies was 9.9529 million yuan, down 42.94% from the same period last year. Both revenue and net profit declined, mainly due to the lower-than-expected development of wireless trunking services in Dongxin network and private network. Judging from the itemized business in the first half of the year, communications electronics decreased by 4.43% compared with the same period last year, while financial electronic equipment increased by 25.25% year-on-year. Among them, financial electronics have achieved more than 20% growth in a row since 13 years. We expect the growth trend of financial electronics business to continue as the company opens up new markets such as City Commercial Bank, Agricultural Credit Market, and overseas.

The financial electronics with high gross margin led the company's gross profit margin to rise slightly, and the proportion of "three fees" was basically flat. In the first three quarters, the company's gross profit margin was 11.91%, up 0.95% from 10.96% in the same period last year, mainly due to an increase in the proportion of financial electronic revenue with high gross margin, which has exceeded 25% in recent years. In the first half of 2015, financial electronics accounted for 25.63%, up 3.59% from 22.04% in the same period last year. The proportion of the overall revenue of the three fees in the first three quarters was 9.04%, compared with 8.8% in the same period last year, which was basically the same.

Benefit from the continuous growth of financial electronics in the short term, the trend of localization of financial electronics in the medium and long term, and the outbreak of companies in the field of private networks. 1. Although the private network business is not as expected, we believe that the company is sitting on TETRA and PDT technology, relying on China's Putian, with outstanding resource endowments, and is still expected to make continuous market breakthroughs in the domestic public security network / subway network / government network in the future. 2. Under the trend of localization, financial electronics continues to grow at a high level. The company has become the largest ATM machine customer of Industrial and Commercial Bank of China in China; in addition, the company CRS recycling machine has broken through Everbright Bank. In the first half of 2015, the company actively expanded the rural credit market and increased the number of customers of urban commercial banks. On the other hand, we have steadily opened up overseas markets, and the number of orders has increased significantly. The trend of sustained high growth of financial electronics in the future is expected to continue.

Profit forecast: over the past 15 years, the market development of the company's private network business has been slow, but the sustained high growth of financial electronics ensures that the company's performance remains stable; in the medium to long term, we are still optimistic about the company's resource endowment in the private network field, as well as the simultaneous possession of TETRA and PDT technology, which will continue to make breakthroughs in the private network market in the future; the localization trend of financial electronics is expected to continue in the next few years. It is estimated that the company's EPS for 15-17 years will be 0.15,0.19 and 0.25yuan respectively, maintaining the "overweight" rating.

Risk hint: private network business is not as expected; financial electronic growth is slowing down.