Event: the company announced revenue of 1.999 billion yuan in the first three quarters of 2018, a year-on-year increase of 22.26%, net profit of 287 million yuan, an increase of 50.25%, net profit of 248 million yuan, an increase of 29.55% over the same period last year, net cash flow of operating activities-143 million yuan, compared with-228 million yuan in the same period last year, and EPS of 0.82 yuan per share Among them, Q3 revenue and home net profit increased by 8.72% and 46.43% respectively compared with the same period last year.

Comments:

The results of the three quarterly reports are in line with the previous company performance guidelines, Q3 revenue growth slowed down, technology business net interest rate continued to rise. This year, the company decided to "lead industry change with digital drive" as the company's development strategy. After adjustment and layout of the business, the company formed an industry cognitive solution business with intelligent security as its main business, and an overall layout that effectively supplemented the company's performance with marine tourism routes and other tourism service business. revenue in the first three quarters reached 1.999 billion yuan, an increase of 22.26% over the same period last year. The net profit of home ownership is 287 million yuan, an increase of 50.25% over the same period last year. The growth rate of net profit of home ownership is within the range of 40% to 55% of the company's performance guidelines. The growth in performance is mainly due to the active expansion of intelligent public security and bright engineering business, the continuous increase in the volume of industry cognitive solutions, and the tourism business due to more typhoons in Q3, the core business is expected to perform poorly on the Beiyang route; the slowdown in Q3 revenue growth is expected to be related to the reduction of government expenditure and the impact of the weather on tourism business.

The technology business has been actively transformed, the Q3 gross profit margin has increased significantly, and the operating cash flow has improved significantly compared with the same period last year. At present, through "end + cloud" technology and innovative data drive, the company has shifted from the traditional project product integration model (IT) to industry awareness service (OT). The increase in the share of technology business in the first half of this year led to a decline in gross profit margin (2.41pct) compared with the same period last year, while as of Q3 gross profit margin increased 0.04pct year-on-year, significantly improving, driving the overall net profit rate to increase 1.39pct. In terms of expense rate, the sales expense rate decreased significantly. Financial expense rate increased, overall expense rate decreased compared with the same period last year 2.73pct The ability to recover money from sales has been enhanced, and the net cash flow of operations has improved significantly; in addition, the proportion of bills and accounts receivable in revenue has dropped to 67.88% from 96.51% in the same period last year.

Profit forecast and investment rating: the company's technology sector will achieve sustained and rapid growth by virtue of its solid technological advantages, controlling shareholder funds, government resources advantages and growing market demand, and the tourism business is operating steadily. at present, although affected by the decline in macroeconomic growth, cuts in government spending and other adverse factors, the company's current business model transformation and rapid expansion of new business in new cities. It is expected to maintain a steady growth trend, at the same time, the company will strengthen cash flow management and reduce operating risks. T We raise our profit forecast for 18-20 years. It is estimated that the company's EPS for 18-20 years will be 1.04 won 1.26 pounds, respectively, and the closing price on October 19 will be 1.51 times that of 13-11-9, respectively, maintaining a "prudent overweight" rating.

Risk tips: passenger flow growth / new routes / new business development is not as expected; government spending is declining; Xinzhi recognizes that new orders are not as expected and transformation is not as expected.