Q3 Revenue grew steadily. Net profit declined year-on-year due to declining gross margin. The company released its 2019 three-quarter report. The first three quarters of 2019 achieved revenue of 9.93 billion yuan, an increase of 18.09% over the previous year, and net profit of 488 million yuan, a year-on-year decline of 5.69%. Among them, the 2019Q3 quarter achieved revenue of 4,014 billion yuan, a year-on-year increase of 18.52%, and net profit of 146 million yuan, a year-on-year decrease of 7.72%. In terms of gross margin, 2019Q3 achieved a gross profit margin of 10.4% in a single quarter, down 5.1 percentage points from the previous year and 1.3 percentage points from the previous quarter. The overall prosperity of the electronics industry generally puts pressure on distributors' performance to grow, but the company's revenue growth rate remains close to 20% due to increased sales of domestic agent line products and increased market share. The year-on-year decline in net profit was mainly due to the year-on-year decline in prices of some product lines (such as MLCC) in 2019, which led to a decline in gross margin. The company strengthened cost control and improved operating quality. The company's sales+management+R&D expenses fell 16.68% year on year in the first three quarters of 2019. Among them, sales expenses fell 28.26% year on year. Increased cost control led to a marked decrease in the company's expense ratio. At the same time, if the impact of investment income categories on net profit is excluded, the company's net profit (excluding investment income) in the 2019Q3 single quarter was 141 million yuan, down 2.46% from the previous year. The Q3 growth rate narrowed sharply compared to Q1/Q2. In addition, the company's net operating cycle was shortened month-on-month, and the cash flow from operating activities improved year-on-year. Profit forecast and rating We are optimistic that the company will embrace future opportunities as a distribution leader and achieve the growth vision of the strong. It is estimated that the company's EPS for 19-21 will be 0.66/0.79/1.02 yuan, respectively, and the corresponding PE will be 21.4/17.8/13.8 times. Referring to the company's leading position and future performance growth rate, the company was given a PE valuation of 20 times its 20-year performance, corresponding to a reasonable value of 15.85 yuan/share, and a “buy” rating. Risks suggest that the electronics industry cycle downturn and growth fall short of expectations; 5G progress falls short of expectations; emerging fields such as automotive electronics fall short of expectations; industry competition is intensifying; and corporate mergers, acquisitions and restructuring integration falls short of expectations.