Incident: The company released a three-quarter report, achieving revenue of 1,621 million yuan, up 1.02% year on year; net profit of 217 million yuan, down 3.48% year on year; deducted non-net profit of 178 million yuan, down 14.11% year on year; of which Q3 revenue was 565 million yuan, down 5.84% year on year; net profit was 83 million yuan, down 11.30% year on year; after deducting net profit of 77 million yuan, down 15.37% year on year. Weak demand, revenue declined slightly, and gross margin maintained a slight improvement trend: demand in Q3 lighting and other fields was weak, while components were tight in the same period last year, and the revenue base was high, in line with the trend of peer companies. However, the company continued to optimize on the cost side, and the electrode foil self-sufficiency rate continued to rise, and the gross margin rebounded 1.79 pct month-on-month in a single quarter, with excellent performance. We expect the company to gain market share through a more aggressive pricing strategy. As the company has now gained a certain position in the industrial field, the price strategy will gradually shrink; in addition, the self-sufficiency ratio of the company's electrode foil also continues to rise, jointly driving up gross margin. Looking forward to the future, the lighting market is expected to stabilize. Consumer electronics will benefit from the continuous increase in switching and fast charging power, and the growth rate is expected to resume. At the same time, breakthroughs continue in high-end fields such as power supplies, and the company's profit side is expected to recover after future demand picks up. High-end products have made steady breakthroughs, and downstream customer support drives long-term growth: aluminum electrolytic capacitors are basic components. Currently, the high-end market is still dominated by Japanese companies. Against the backdrop of an emphasis on autonomy and control and the rise of downstream terminals, there is strong demand for domestic alternatives. Meanwhile, the company's high-end products such as solid-state capacitors (revenue growth of nearly 30% in 2018) and MLPCs have been mass-produced, and the trend of breakthroughs in the middle and high-end markets is already evident, and it is expected to gradually replace Japanese in the future. Comparatively speaking, although Japanese manufacturers account for more than 50% of the market, their main factories are on the mainland, and the cost side disadvantage is obvious. Profit pressure has been prominent in recent years, gradually shrinking to high-end fields such as communications, industry, and automobiles, in order to stabilize profitability, and the industrial shift has brought a lot of room for growth to domestic leaders. The second phase of the company's project is expected to contribute more in 20 years, and further penetration in the fields of communications and industry is worth looking forward to in the future. Build a new intelligent factory and continue to strengthen core competitiveness. The company has upstream core equipment design capabilities. The new production capacity of its 5 plants is built according to the latest automation standards, with a full production capacity of less than 300 people. The corresponding output per capita has more than doubled compared to the present. The new bond-raising plant is designed according to this standard and is expected to be put into operation around the end of 19. At that time, labor costs are expected to decrease while revenue increases, and the profitability center is expected to rise. Investment advice: Wait for demand to pick up, drive a recovery in the medium term growth rate, speed up import substitution of high-end products, and open up long-term space. We expect the company's net profit for 2019/20/21 to be 3.07/4.18/519 million yuan (the previous forecast was 3.43/4.67/583 million yuan for 2019/20/21), EPS of 0.79/1.07/1.33 yuan, growth rate of 2.9%/36.0%/24.1%, “buy” rating. Risk warning: The progress of production capacity release is low, and expectations for high-end market expansion are low.