1. Event Overview The company released its report for the third quarter of 2018: it achieved revenue of 3,331 billion yuan, an increase of 5.49% over the previous year; net profit of the mother was 4.7 billion yuan, an increase of 10.52% over the previous year. 2. Analysis and judgment: Short-term performance was under pressure. Gross margin increased. The company's overall revenue and profit increased steadily in the first three quarters, but revenue for the third quarter was 998 million yuan and net profit was 120 million yuan, both of which declined over the previous year. Mainly, revenue growth in the fiber-optic cable business sector was slow. The reason is that China Mobile's revenue growth in the fiber-optic cable business sector has been slow since fiber optic cable collection at the beginning of the year. The company's gross profit margin for the first three quarters was 29.27%, up from last year, up 0.33pct year on year. The company's cash flow from operating activities declined significantly year-on-year in the first three quarters, mainly due to the value-added tax refund from the subsidiary Baizhuo Network, the subsidiary Tongding Guangbang's new tax policy and equipment input tax withholding tax, and increased employee salary adjustments, equity incentives, dividends, and withholding of personal taxes. The second phase of the optical rod reached production, and the production capacity of the company that won the first share of the cable was continuously released. The first phase reached production of 300 tons in 2017, and the second phase also reached production of 300 tons recently. Currently, the company has its own production capacity of 600 tons. At the same time, the company has strengthened cooperation with external strategic partners, and optical bar production capacity has been further expanded. It is expected that China Mobile will launch a new round of fiber-optic cable collection by the end of the year, and the company's fiber-optic cable business is expected to pick up in the fourth quarter. At the same time, the company won the bid for China Mobile's centralized procurement of power cable products from 2018 to 2019 with the first share, with a bid amount of 1.15 billion yuan, which will have a positive impact on the company's revenue in the fourth quarter and next year. To strengthen cooperation with US companies and develop new fields to improve the industrial layout, the company further strengthened R&D in the field of 5G equipment in the third quarter to develop markets such as transmission and access. At the same time, a strategic partnership was formed with the US company UTS in September of this year. The latter developed and launched a series of industry-leading products and solutions in the field of optical transmission, such as PTN and SynCring. This strategic cooperation will help the company advance equipment research and development in the 5G era and build new channels. 3. Profit forecasts and investment recommendations expect the EPS in 2018-2020 to be 0.53, 0.65, and 0.81 yuan respectively, and the corresponding PE of 13, 11, and 9 times, respectively. The company's minimum PE value and average value in the past three years were 13 times and 52 times, respectively. Maintain a “Recommended” rating. 4. Risk warning: Optical rod production capacity expansion falls short of expectations; cybersecurity business development falls short of expectations.