The 3Q19 performance fell short of market expectations. The company announced 3Q19 results: revenue of 640 million yuan, up 15% year on year; net profit of 12.38 million yuan, down 75% year on year, lower than market expectations, mainly due to delayed delivery of the company's video surveillance projects and high cost rates. The company's equity incentive conditions in 2019 were that net profit from the mother reached 418 million yuan, which means that the company's net profit from the mother in 4Q19 needed to reach 390 million yuan, accounting for 94% of the year. Due to the characteristics of the industry, the fourth quarter is generally the company's repayment period. In 2017/18, the company's 4Q revenue accounted for 40%/62% for the full year of that year, and net profit from the mother accounted for 37%/56% for the full year of that year. However, we believe that there is great uncertainty about the company's 4Q19 revenue. The net profit of the mother in 2019/20 was lowered by 40%/31% to $2.55/360 million, and the target price was lowered to RMB 14. Development trend 3Q19 revenue fell short of expectations: the company's 3Q19 revenue was 640 million yuan, an increase of 15% over the previous year. The revenue growth rate rebounded month-on-month, but it was lower than the same period last year and fell short of market expectations. The company's accounts receivable at the end of 3Q19 were 1,113 billion yuan, up 61% year on year; long-term receivables were 130 million yuan, up 696% year on year. Revenue fell short of expectations and the sharp increase in receivables, mainly due to delays in video surveillance government projects such as Fengning PPP, and the inability to confirm revenue. Continued high R&D investment: The company's 3Q19 R&D expenses were 181 million yuan, an increase of 18% over the same period last year. The growth rate exceeded the revenue growth rate for the same period, and R&D expenses accounted for 28% of revenue. We believe that in the context of intelligent security, the company's high proportion of R&D investment is a guarantee for enhancing the company's future competitiveness. Profit Forecast and Valuation Due to the company's performance falling short of expectations, considering the uncertainty of the company's revenue recognition, we lowered net profit in 2019/20 by 40%/31% to $255/360 million. The current stock price corresponds to a price-earnings ratio of 22.5 times /15.9 times in 2019/2020. Maintaining the “outperforming industry” rating, the target price was lowered by 30% to 14.00 yuan, corresponding to the price-earnings ratio of 19.6 times in 2020, with 23% room for increase from the current stock price. Risk macro demand continues to weaken; government project revenue confirmation falls short of expectations.