Performance Overview: Revenue and net profit continued to grow at a high rate. In line with expectations, the company released its 2018 three-quarter report, achieving operating income of 15.791 billion yuan, an increase of 80.66%; net profit of 828 million yuan, an increase of 67.23% over the previous year; net profit after deduction of 788 million yuan, an increase of 59.78% over the previous year; EPS of 0.54 yuan; and a net interest rate of 5.25%. On a quarterly basis, quarterly revenue from 18Q1 to Q3 increased by 74.38%, 79.81%, and 86.70%, respectively, and net profit increased by 65.05%, 56.86%, and 78.10% year-on-year respectively. The revenue side has maintained a high growth rate of more than 70% since 2018, and has continued to accelerate from quarter to quarter, mainly due to the merger of Youyi e-commerce in February '18 and the original business to maintain a high growth contribution; the net profit growth rate is slightly lower than revenue, which is related to the overall drag on the merger of Youyi e-commerce, which has a lower net interest rate. Revenue splitting: The export growth rate continues to grow healthily. The company is mainly engaged in cross-border e-commerce business (accounting for 99.19% of revenue), and there is also a small domestic clothing sales business in the 100 yuan pants industry. 1) The main cross-border e-commerce business by subject: Global E-Commerce (mainly export business, with a small amount of imports) revenue of 9.220 billion yuan, up 28.80% year on year, net profit of 551 million yuan, up 26.13% year on year, net profit margin of 5.97%; Qianhai Patoxon (export business) revenue of 2,328 million yuan, up 58.92% year on year, net profit margin of 186 million yuan, up 40.77% year on year, net profit of 7.99%; Excellent e-commerce (import business, consolidated in February 2018) contributed 435 million yuan to net profit 210 million yuan, net profit margin 5.07%. 2) Looking at the main cross-border e-commerce business by export and import: The company's export revenue still dominates (mainly B2C), and is implemented through Global E-Commerce (through its own website+third-party platform, which operates two major categories of clothing and electronics) and Patuxon (a third-party platform, mainly in the electronic category). Global Tesco's export business revenue increased 39.69% year on year. Among them, the revenue of clothing self-operated sites, electronic self-operated sites, and third party sites is expected to increase by 29%, 54%, and 34%, respectively. The Q3 single-quarter growth rate is not much different from the first half of the year. Furthermore, Tesco Global's import business is currently small and does not contribute much to performance. Financial indicators: gross profit margin and expense ratio due to a decline in consolidated statements, total inventory growth but structural optimization, overall cash flow to positive gross profit ratio: From January to September, gross margin fell 9.88PCT to 34.91% year on year, mainly due to the merger of Youyi e-commerce and its lower gross margin overall decline; Qianhai Pattoson's gross margin is expected to remain basically flat, and global Tesco holdings have declined slightly, mainly due to increased inventory clearance efforts. The gross margins for the single quarter from 18Q1 to Q3 were 44.71% (-4.60PCT), 35.79% (-10.79PCT), and 36.08% (-13.21PCT), respectively. Expense rate: The company's fee rate for the period decreased by 8.44PCT to 32.06% year on year, mainly due to the merger of Youyi e-commerce. Among them, sales, management+R&D, and financial expenses were 29.33% (-7.88PCT), 2.08% (-0.50PCT), and 0.64% (-0.06PCT), respectively. Other financial indicators: 1) At the end of September '18, inventories increased by 20.20% from the beginning of the year to $4.664 billion, and the inventory turnover ratio was 2.27, up from 1.61 in the same period last year (however, the comparative significance declined due to the interference of superior mergers). Judging from the inventory structure, the company has increased its inventory clearance efforts at Global Tesco this year. The storage age structure has been further optimized, and light packaging will be launched in the future. Currently, Global Tesco+Patoxon is expected to account for about 2/3 of goods aged within 3 months, and the share of goods older than 1 year is expected to be only in low to medium digits, with a declining share. 2) Accounts receivable increased by 160.06% from the beginning of the year to 1,724 billion yuan. The large increase was mainly due to the merger of Youyi e-commerce and the expansion of its own business scale. The turnover ratio of accounts receivable was 13.23, a slight decrease from 15.27 in the same period last year (there was interference from You1 e-commerce). 3) Accounts payable increased by 33.95% from the beginning of the year to 1,222 billion yuan. Considering that Youyi e-commerce mergers did not increase much, it shows that the company's account management and control are gradually showing effectiveness, and bargaining power with suppliers and others is improving. If the total value of inventory+accounts payable is calculated, the growth rate of this indicator has rebounded at the end of each quarter since the end of June 2017. The end of March, the end of June, and the end of September '18 increased by 87%, 93%, and 78% respectively over the same period of the previous year. The growth rate continued to be high, and there was a significant increase over 17, indicating that the company's account management continued to be effective. 4) Cash flow is positive and continues to improve. The net cash flow from the company's operating activities from January to September was 149 million yuan, which was positive from -527 million yuan in the same period last year. Looking at the spin-off, the net cash flow from e-commerce activities of Global Tesco, Qianhai Patuxon, and Youyi was 197 million yuan, 33.17 million yuan, and -50.36 million yuan, respectively. Judging from the company's historical cash flow, there has been a net outflow of cumulative statement operating cash flow from 15 years to now. This year's three-quarter report began to be corrected, and 18Q2 at the single-quarter level began to improve quarterly cash flow for two consecutive quarters. If we consider that Premium E-Commerce had a combined influence in 2018, and that Premium E-Commerce had a net cash outflow, the effects of the original Global Tesco and Patuxon in cash flow management have gradually been reflected. 5) Asset impairment losses fell 4.23% year over year to 34.49 million yuan. The US withdrawal from the Postal Union had little impact on the company. The US announced on October 17, 2018, that it plans to issue overseas bonds to optimize the financing structure. On October 17, 2018, the US announced its withdrawal from the Universal Postal Union (the alliance encouraged e-mails and parcels sent from China to the US to enjoy lower postage fees, and small and medium-sized cross-border e-commerce sellers benefit relatively more). If the matter is formally implemented, the short-term impact on the company is minimal, and long-term benefits to the company's competitive advantage as a leader will be highlighted. Among them, more than 95% of goods sent by Global Tesco to the US are delivered through its own logistics line system and couriers. The total amount of goods sent to the US through the postal system is less than 5% of the total volume of goods sent by Global Tesco to the US, which is equivalent to about 1% of the company's total cross-border export business; Patuxon's shipping model is mainly FBA overseas warehouses, supplemented by express delivery, and has not used the transportation methods of the Chinese postal system, so its business is not affected by this incident; Youyi's e-commerce business is imported and is not affected. The company will further develop its leading advantages, strengthen the construction and optimization of cross-border independent logistics lines, build core competitiveness and operational barriers, and promote logistics localization and overseas warehouse construction. The company announced on 2018.9.29 that it intends to issue no more than 300 million US dollars of overseas bonds through overseas third-tier subsidiaries for a period of no more than 3 years (including 3 years), which is conducive to enhancing the company's financial strength, broadening financing channels, adjusting and optimizing the company's debt structure, and reducing financing costs. Mr. Xu Jiadong became the actual controller, calling on employees to increase their holdings and guarantee profits and demonstrate confidence in development. The company announced on 2018.9.21 that Mr. Xu Jiadong, vice chairman and general manager of the company, became the actual controller of the company: Mr. Yang Jianxin, the chairman and former actual controller, irrevocably entrusted Mr. Xu Jiadong once and for all the disposable voting rights corresponding to the company's shares, which account for 6.9381% of the company's total share capital. After the voting rights mandate comes into effect, Mr. Xu Jiadong will have a cumulative total of 24.50% of the company's total share capital, and will become the new actual controller of the company. At the same time, Yang Jianxin and Fan Meihua will reduce their holdings of 7.04% of the company's total share capital to third parties through agreement transfers and/or bulk transactions (priority transfer of shares corresponding to unentrusted voting rights). It is not ruled out that Mr. Xu Jiadong or his designated third party participate in the transfer of these shares, and that Mr. Xu Jiadong and his designated third party have priority transfer rights under the same conditions; the previous letter of intent signed by Yang Jianxin and Mr. Xu Jiadong in April 2018 has been terminated. The company announced on October 19, 2018, that the chairman and vice chairman of the board issued a proposal to increase their holdings to internal employees and promised to increase their holdings of the company's shares during the period 2018.10.19 to 11.18, and those who have held shares for 2 consecutive years and are still working for the company will be compensated jointly by the initiator for stock holding losses; at the same time, those holding less than 8% in the first year and less than 12% in the second year will be compensated by the promoter. There is no upper limit on compensation payments. Core competitiveness continues to be built, financial indicators continue to improve, and strategic results are verified. The company expects net profit from the mother to increase by 50-80% for the full year of 2018. Based on the continued growth of the main cross-border e-commerce business, the company began merging 100% of Youyi E-commerce's shares and 10% of Patuxon's shares in February 2018. The former increased revenue and profits, while the latter increased profits to a certain extent. We believe that: 1) On the basis of maintaining good business growth, the company focuses on improving the quality and efficiency of operations, further strengthening inventory and cash flow management, making inventory scale and structure more optimized, and improving the quality of cash flow, which is conducive to the long-term sustainable development of the company. 2) The e-commerce market for cross-border exports is vast and diverse, and there is plenty of room for business development. At the same time, while the company has achieved a certain first-mover advantage and scale effect in the B2C export field, it focuses on building core competitiveness and improving management quality, gradually building an enterprise moat in the blue ocean and bridging the gap with competitors. With the steady progress of various internal strengths, the company is expected to continue to increase its share and grow into an irreplaceable industry leader. Currently, the company's strategy focuses on promoting platformization, localization, and branding, and building core competitiveness through initiatives such as building a high-quality logistics system, optimizing the supply chain system, and continuous technology investment. 3) In the short term, trade disputes between China and the US and the US side's plan to withdraw from the UPU will have limited impact on the company, and it is expected that the company's unique competitiveness will be strengthened through measures such as building its own special distribution line. 4) In terms of management changes, Mr. Xu Jiadong, a core figure in the company's business, officially became the company's actual controller. It is deeply tied to the company's long-term development, which is conducive to the implementation of the company's various strategies and the improvement of business development execution. We have long been optimistic about the huge development space of the company's industry and the continuous strengthening of the company's leading advantages. In the short term, uncertainty in the trade environment and macroeconomic uncertainty in major economies may affect the demand side. We slightly lowered EPS in 18-20 to 0.78/1.07/1.40 yuan, corresponding to PE 14 times in '18, maintaining a “buy” rating. Risk warning: weak foreign demand, risk of changes in the international trade environment or e-commerce platform policies, improper mergers and acquisitions integration.