Quarterly net profit increased 61% in the third quarter of 2018, and performance growth exceeded expectations. 1) The company achieved revenue of 15.79 billion yuan in the first three quarters of '18, an increase of 80.7% over the previous year; Guimu's net profit was 8.3 billion yuan, an increase of 67.2% over the previous year. Net profit for the first three quarters had already surpassed the whole of last year. 2) Q3 revenue for the 2018 Q3 quarter increased 86.7% year-on-year to 5.91 billion yuan, and Guimu's net profit increased 78.1% year-on-year to 320 million yuan. 3) The company expects a 50% to 80% year-on-year increase in results for the full year of 2018.

The quality of operations has been greatly improved, and advantages of scale have continued to be unleashed. 1) Looking at the balance sheet, the effect of inventory control is obvious. The inventory reported for the third quarter increased slightly by 150 million yuan to 4.66 billion yuan compared to the interim report. Under high growth, the inventory scale was well controlled. We believe that the company's sales situation continued to improve. Accounts payable increased sharply by 440 million yuan to 1.22 billion yuan, large-scale dividends were released, and bargaining power with upstream suppliers was strengthened. 2) Looking at the cash flow statement, the net operating cash flow reported for the third quarter of 2018 improved sharply by 150 million yuan. Among them, Global Tesco had a cash flow of 150 million yuan for the first three quarters and 130 million yuan for Q3; Patson's operating cash flow for the first three quarters was 33.17 million yuan, and Premium E-commerce - 50.35 million yuan. We believe that the fourth quarter is the peak season for overseas e-commerce. In an environment where the entire industry is speeding up the preparation of goods, the scale of the company's accounts payable has increased, leading to an improvement in cash flow, and the leading hematopoietic advantage has been strengthened.

Cross-border export business continues to grow explosively. In the short term, we are optimistic that the peak season will flourish, and the strong will continue to thrive in the long term. 1) Cross-border export business is not declining during the off-season. The revenue of Global Tesco subsidiaries increased 28.8% to 920 million yuan in the first three quarters, of which cross-border export business revenue increased 39.7% year on year; Qianhai Patson's revenue increased 58.9% year on year to 2.33 billion yuan, and export business continued to gain strength. 2) Self-operated export platforms are gaining strength during the peak season. According to third-party ranking data provided by Alexa, the number of visits to the company's GearBest integrated platform is currently about 224 in the global ranking (weekly average), which is a significant increase from 300 in late October last year; ZAFUL's weekly ranking is 1904, and Rosegal's ranking is 4170. We are optimistic that the company's platform will go even further during this year's peak season! 3) Optimistic about the leaders and the strong will always be strong. We believe that trends such as the US plans to withdraw from the Universal Postal Union and the gradual standardization of cross-border e-commerce taxes will further drive the reshuffle of the industry. The advantages of leading enterprises in logistics, supply chain, and standardization will continue to strengthen, and the core competitiveness construction invested in the early stages will continue to show results, and the industry will shift from early barbaric growth to strength for the strong.

The initiative promises to secure earnings by increasing holdings, demonstrating strong confidence in future development. On October 19, the company issued an announcement. Based on confidence in the company's good fundamentals and long-term good development, the company's chairman and vice chairman encouraged employees to use their own funds to increase their cross-border stock holdings. If the proposed employee's net purchase of Cross-border Connect shares reaches 24 months after the holding period reaches 24 months, the sponsor will make up for the portion of earnings of less than 8% in the first year and less than 12% in the second month. We believe that initiatives to increase holdings that promise future earnings are scarce, strongly demonstrating the sincerity and confidence of company executives in performance growth.

Cross-border Connect is a scarce leading enterprise with high growth and undervalued value. The three-quarter report performance growth and operational improvement all exceeded expectations, maintaining “buying”. The company further improved “localization and platformization” construction in 18 years, continued to expand its business scale, and continuously improved its financial soundness. We are firmly optimistic that the company's core competitiveness will continue to be strengthened, that the peak season will usher in higher quality growth, and that the industry concentration will continue to increase in the future, and it is expected to become a leading enterprise with sales of 100 billion dollars. Considering that the company's financial expenses in the first half of the year included a certain amount of interest expenses and exchange losses, we maintain our original profit forecast. We expect EPS for 18-20 to be 0.77/1.01/1.29 yuan, and the corresponding PE is 14/10/8 times, maintaining the “buy” rating.