Revenue growth in the first three quarters is steady and performance is in line with expectations; the company's asset consolidation peak is approaching, and asset turnover efficiency is expected to pick up in the future, which is expected to accelerate the company's profit growth; maintain the EPS forecast of RMB 0.21 in 2019-2021, maintain the "buy" rating, and maintain the target price of RMB 10.00.

The results in the first three quarters were 0.15 yuan, in line with expectations. In the first three quarters, the company achieved revenue of 580 million yuan, an increase of 12.02% over the same period last year, and a net profit of 117 million yuan, an increase of 27.35% over the same period last year. In terms of EPS0.15 yuan, the performance in the first three quarters accounted for 70.35% of our annual forecast, which was in line with expectations. From a quarterly point of view, Q3 realized a net profit of 0,549 yuan, an increase of 24.1% over the same period last year, which is equivalent to EPS0.06 yuan.

Quarterly revenue growth performance is solid, cash flow is still excellent. From 1Q to 3Q this year, the company's quarterly revenue growth rate has maintained a steady growth trend of more than 10% compared with the same period last year, and the Q4 growth rate is expected to continue; the company's comprehensive gross profit margin in the first three quarters was 51.0%, and the gross profit margin remained high and increased by 1.2% compared with the same period last year, mainly due to the prosperity of the industry and the company's bargaining power. In terms of period expenses, the rate of management expenses decreased by 0.8% compared with the same period last year to 10.0%, and the rate of financial expenses decreased by 1.4% to 7.0% compared with the same period last year. The net cash flow of operating activities in the first three quarters was 349 million yuan, with an excellent performance, which decreased by 21.84% compared with the same period last year. This is mainly due to the one-time refund of 113 million yuan in VAT retention and deduction in Q3 company last year. At the end of the third quarter, the scale of the company's accounts received in advance was 76 million yuan, an increase of 46% over the same period last year. The sharp rise in accounts received in advance laid a good foundation for the company's subsequent revenue growth.

Outstanding technical and regional advantages, multiple driving forces to help the performance to meet the inflection point. The stage of horse racing enclosure in the domestic testing industry has come to an end, and the competition pattern of "small and weak scattered" is about to usher in a change, and the leading companies will benefit accordingly. After continuous strengthening investment, the company has obvious qualification advantages and outstanding bargaining power in the field of electrical testing. In 2017, the company ranked first in the market share of high and low voltage electrical appliances testing, with a clear lead. It is expected that the company's strengthening of asset construction to set up qualification barriers will soon come to an end, internal management reform and external expansion may be put on the agenda, coupled with the end of the natural climbing phase of project capacity, and the scale of depreciation will peak in 2020. it is expected that the company's project capacity utilization efficiency is expected to improve, revenue and profit growth are expected to accelerate, promoting the company's performance flexibility release.

Risk factors: slow expansion of high-voltage testing business; brand credibility affected; macro-economic decline and so on.

Investment suggestion: the company's results in the first three quarters are in line with expectations, maintaining the company's net profit forecast of RMB 1.62 million for 2021, which translates to EPS of RMB 0.21 million, and the current share price corresponding to PE is respectively times higher than that of 33-25-19. With reference to the valuation of similar companies in the industry and the historical valuation of the company, the company is given a target of 35 times PE in 2020, with a target price of 10.00 yuan, maintaining a "buy" rating.