The 3Q19 results are in line with our expectations. Mikawa Smart announced the results for the first three quarters of 2019:1-3Q19's operating income was 585 million yuan, up 17.9% year on year; net profit to mother was 1.19 yuan, up 43.1% year on year, corresponding to profit of 0.11 yuan per share. The third quarter's revenue for a single quarter was 242 million yuan, up 30.7% year on year. Net profit belonging to the parent company was 60 million yuan, up 46.3% year on year. The performance was in line with the company's previous performance forecast and our expectations; in particular, the company's net profit after deducting 3Q19 was 52 billion yuan, up 28.7% year on year. The volume of NB-IoT IoT water meters is driving rapid revenue growth. Due to the sharp increase in sales of smart water meters represented by NB-IoT IoT water meters, 3Q19's revenue increased by 30.7%/22.7% year over month, respectively, and continued to maintain a rapid growth trend. Due to the increase in the share of smart meters, the comprehensive gross margin of 1-3q19 companies increased by 3.2ppt to 36.9% compared to the same period last year; the company's gross margin in a single quarter was 37.8%, up 0.9ppt from the same period last year. Expense rates remained stable during the period, and cash outflows increased. The overall cost ratio of 3Q19 Company decreased by 0.3 ppt year on year. Among them, the management expense ratio decreased by 1.6 ppt year on year, and the sales/R&D/finance expenses ratio increased by 0.1/0.2/1.2ppt, respectively. Thanks to the increase in gross margin, 3Q19's net sales margin was 24.9%, up 2.7 ppt year on year. Mainly due to the long billing period and rapid release of smart water meters, the accounts receivable and inventory balance of the 3Q19 company increased by 0.53 billion yuan compared to the middle year; the net cash flow outflow of the 3Q19 company's operating activities was 50 million yuan. Development trend The intelligent water meter strategy achieved initial success. Since the first half of 2018, the company has actively expanded the NB-IoT meter business. In the first three quarters of 2019, the company's smart water meter revenue far exceeded that of mechanical water meters. According to the company's estimates, the company's current smart water meter market share is about 10-15%, which shows that the company's intelligent strategy has achieved initial success. We are optimistic about the development prospects of the company's smart watch business. Looking ahead, with the official advent of the 5G era, as one of the first companies to apply Huawei NB-IoT communication technology to smart water meters, the company has a clear first-mover advantage, and the NB-IoT meter business will usher in greater development opportunities. In addition, the company has also increased investment in research and development of water management software, which we believe will further strengthen customer stickiness and gradually transform the business of providing data services to customers. Profit forecast and valuation We maintain the company's profit forecast for 2019/2020 unchanged. The company's current stock price corresponds to 33.8/28.0 times P/E in 2019/2020, maintaining an outperforming industry rating. We maintain the company's target price of 5.40 yuan, which corresponds to 40/30 times P/E in 2019/2020. Compared with the current stock price, there is 18% room to rise. The promotion of risk smart water meters fell short of expectations.