Key investment events: Sega Technology's third quarter results revealed that the first three quarters of 2019 achieved operating income of 1,431 billion yuan, a year-on-year growth rate of 60.13%, net profit of 98 million yuan, a year-on-year increase of 282.56%, and earnings of 0.59 yuan per share. The results for the third quarter exceeded expectations, and the overall gross margin improved steadily. There was a slight decline in the single quarter: the rapid growth of 5G mobile communication equipment products boosted performance. The third quarter achieved operating income of 522 million yuan, an increase of 49.59% over the previous year; net profit of 38 million yuan was realized, up 207.89% year on year. Also, the company's expansion into overseas markets has led to an increase in sales of the company's mobile communication equipment-related products. The gross sales margin for the first three quarters of 2019 was 19.69%, and the net sales margin was 7.78%. Among them, the gross sales margin for the third quarter of 2019 was 18.81%, down 3.86pp from the second quarter. Net sales margin was 8.19%, down 1.30pp from the second quarter. The scale of sales increased, and expenses increased: Expenses of 135 million yuan were incurred in the first three quarters of expenses, including financial expenses of 102 million yuan, management expenses (including R&D expenses) of 102 million yuan, and sales expenses of 31 million yuan. Total expenses exceeded total expenses in 2018. Of these, sales expenses in the third quarter were 11 million yuan, up 59.77% from the previous year. To increase communication R&D expenditure, a forward-looking production capacity layout has begun: Sega Technology has continuously increased R&D investment in the communications industry and strengthened its leading edge in core technology. Development expenditure in the first three quarters was 57 million yuan, an increase of 78.13% over the previous year. At the same time, in order to plan the production capacity of ceramic waveguide filters in advance, it is planned to purchase land use rights from the Hushu Guan Economic and Technological Development Zone in Suzhou City, Jiangsu Province to deepen product and customer layout to build the “Sega Technology New 5G Ceramic Waveguide Filter Project” to deepen the product and customer layout and build momentum for 5G development: the mobile communication equipment business as the core business should seize the golden period of national 5G construction. On the one hand, we should actively deepen product layout and increase new product development efforts, so that customers can further increase their recognition of the company's products; on the other hand, on the basis of serving existing customers, actively develop new customers and markets for the company Continued development reserves new momentum. Profit forecast and investment rating: Benefiting from leading R&D and manufacturing capabilities in the integration of filters and antennas, we believe the company's revenue will continue to benefit. The EPS for 2019 to 2021 is expected to be 0.87 yuan, 1.48 yuan, and 1.90 yuan respectively, and the corresponding PE is 42/25/19X, maintaining the “buy” rating. Risk warning: 5G falls short of expectations; loss of a single major customer; increased competition in the communications sector; loss of market share and risk of falling prices.