Investment recommendations Yiyatong announced the third quarter results: 3Q18 revenue of 17.02 billion yuan, down 0.9% year on year, main business profit fell 2.4% to 1.19 billion yuan, main business profit margin fell 0.1ppt to 7.0%, net profit to mother fell 67.0% year on year to 48 million yuan, and net profit after deducting non-return mother fell 69.9% year on year to 42 million yuan. The main business revenue for the first three quarters was $53.76 billion, up 13.6% year on year; gross profit increased 16.0% to 3.70 billion yuan, but net profit to mother fell 18.0% to 390 million yuan. 3Q18 saw a net operating cash outflow of $840 million, ending three consecutive quarters of net inflows. The third quarter results fell short of expectations. The main reason was that in the context of the country's financial deleveraging, financial expenses grew rapidly, and consumption growth was weak in the third and fourth quarter, and Yiyatong contracted its business scale. The company's 2018 annual performance guide is 179-476 million yuan, corresponding to a growth rate of -70 to -20%. Considering the pressure on supply chain companies' performance and the high financing costs of Yiyatong, we downgraded the rating to neutral, while lowering the target price by 35% to 5.5 yuan. The reason is as follows: In the context of national financial deleveraging, corporate financing costs have risen, and the financial pressure on private enterprises in the supply chain is high: 3Q18 financial expenses increased 75.3% to 477 million yuan, which is the highest level since 2017. Short-term loans of 21.5 billion yuan, with a pledge ratio of as high as 80.3%; Yiyatong Holdings completed the transfer of controlling rights to Shenzhen Investment Control on September 9 and completed share delivery on October 19. After completing the delivery, Shenzhen Investment Holdings held 18.3% of the total share capital and 17.85%. It is expected that the company's financing channels will improve in 2019, capital costs or decline, but we are concerned about the uncertainty of the company's future business and management changes; what is the biggest difference between us and the market? We believe that during the economic downturn, Yiyatong was squeezed upstream and downstream, financing costs rose, capital pressure increased, and there were short-term liquidity risks. Potential catalysts: Upside: Shenzhen Investment Holdings may raise the company's credit level; downside: further business contraction, higher financing costs, and higher equity pledge ratio. Profit forecast and valuation We lowered our 2018/19e profit forecast by -54%/-15% to $305/662 million yuan. The net profit growth rate to mother was -48.7%/116.7%, respectively, and the target price was lowered by 35% to 5.5 yuan, which corresponds to 17.6 times the 2019 price-earnings ratio and 5.2% upward space, and downgraded it to a neutral rating. High risk financing costs; equity pledge risk; macroeconomic downturn.