Incident: The company announced its 2019 three-quarter report. In the first three quarters, it achieved operating income of 971 million yuan, an increase of 95.95% over the previous year, and realized net profit of 53 million yuan to mother, an increase of 20.32% over the previous year, and achieved earnings of 0.22 yuan per share. Comment: (1) The company's revenue for the first three quarters increased 95.95% year on year, of which Q3 achieved 403 million yuan, an increase of 94.22% year on year, mainly due to growth in equipment development and support business and increased scope of consolidation; the company's gross margin for the first three quarters was 26.10%, down 7.74 percentage points from last year, mainly due to changes in revenue structure; (2) The company's net profit to mother for the first three quarters was 53 million yuan, an increase of 20.32% year on year. The main reasons why the net profit growth rate of the reporting period was lower than the revenue growth rate: a) operating costs increased by 118.89% year on year, mainly due to revenue growth and changes in revenue structure; b) sales expenses increased by 33.98% year on year and management expenses increased 36.91% year on year, all due to an increase in the scope of consolidation; (3) in terms of assets and liabilities, a) the end of the inventory period increased by 50.79% compared to the beginning of the period, mainly due to an increase in production of equipment development and support business; b) Development expenses increased by 46.56% compared to the beginning of the period, mainly due to the increase in product development expenses for new models caused by; (4) In terms of cash flow, a) net cash flow from operating activities increased by 0.14 million yuan, mainly due to increased sales repayments; b) net cash flow from investment activities increased by 327 million yuan, mainly due to large overseas mergers and acquisitions expenses in the previous period; c) net cash flow from financing activities decreased by 89.86% year on year, mainly due to the large amount of overseas mergers and acquisitions loans in the previous period. The applications of airborne equipment are diverse, and automatic detection has broad prospects. In terms of airborne equipment, the company's products cover flight recording systems, integrated data acquisition and information processing systems, and helicopter health management and monitoring systems (HUMS). The main customers are domestic aircraft assembly and operation enterprises and institutions. The products are widely used in various domestic aircraft and helicopter models. Among them, the drone flight parameter recording system and the new wide-body helicopter HUMS system were verified in 2019. The company has a first-mover advantage in the field of automatic test equipment (ATE), can test and guarantee all models and models in China, and has large-scale production capacity. In the future, the degree of systematization and integration of aircraft will continue to increase, the complexity of avionics systems will increase, and the demand for safety testing will become more and more prominent, so the demand for automatic inspection tools for electronic equipment such as ATE will rise for a long time. At the same time, with the gradual installation of our military's new military aircraft, the company's airborne equipment and inspection system business will benefit for a long time. Multinational mergers and acquisitions of aviation maintenance targets, and the global layout enhances performance. In March 2018, the company wholly acquired MMRO. The target company is mainly engaged in aviation maintenance and air asset management business, and can provide maintenance services for mainline and regional passenger aircraft such as A320, B727, and CRJ. In February 2019, the company continued to wholly acquire DMH B.V., a subsidiary of MMRO, which specializes in airframe maintenance services for wide-body airframes. Through two mergers and acquisitions, the company expanded its aviation maintenance business from parts maintenance support to maintenance support such as base maintenance, route maintenance, aircraft modification and painting, covering mainstream narrowbody and wide-body passenger aircraft routes, and expanding its business area to global markets such as Europe, the Middle East, and Africa. Since the aviation maintenance business is less correlated with economic fluctuations, and the company and the target of the acquisition fully complement each other in terms of region and business model, continuous acquisitions will enhance and stabilize the company's long-term performance. Investment suggestion: Considering the stable development of the company's aviation maintenance business and the clear expectation that airborne equipment will be driven by military aircraft equipment, we predict that the company's EPS for 2019/20/21 will be 0.34/0.48/0.59 yuan respectively, corresponding to PE of 48/35/28 times. The first coverage will give the company an “increase in weight” rating. Risk warning: Military-grade equipment is growing slowly, and the results of mergers and acquisitions have fallen short of expectations.