Guangri Co., Ltd. released its 2019 three-quarter report: the first three quarters achieved revenue of 4.52 billion yuan, an increase of 11.9% over the previous year; net profit of 360 million yuan, an increase of 38.8% over the previous year, and net profit of 340 million yuan after deducting non-return net profit of 340 million yuan, an increase of 63.7% over the previous year, slightly lower than expected. Net profit is expected to rise back to 480 million and 610 million yuan in 19/20, corresponding to 19/20 PE by 15 times and 12 times. Based on the judgment that the prosperity of the elevator industry in this round can be maintained for 2-3 years, the company's rating was raised to “Highly Recommended - A”. The operating conditions of the company's main business have improved, and investment income from Hitachi has increased dramatically. The main reason why the net profit growth rate is lower than expected is that there has been a large decline in non-recurring income. The company's net investment income for the first three quarters was 325 million yuan, an increase of 141 million yuan over the previous year. Among them, Hitachi's investment income was 300 million yuan (a year-on-year increase of 77.24%), which is generally in line with expectations. The reasons for the lower-than-expected growth rate of net profit include: ① The government subsidy for the first three quarters of '19 was about 15 million, nearly 30 million in the same period last year, a decrease of 50% over the previous year; ② 18Q3 received nearly 25 million in performance compensation, which included non-operating income, while non-operating income in '19 was only 1.9 million; ③ The rapid month-on-month decline in net profit in Q3 was mainly due to changes in the pace of Hitachi's revenue confirmation, and industry sentiment was still improving. There were signs of improvement in gross margin, and net interest rates rebounded sharply. The overall gross margin for the first three quarters was 13.82% (13.75% in the same period last year), a slight improvement in comparison. Net interest rates, on the other hand, rebounded sharply, mainly due to the large increase in Hitachi's investment income. The essential reason was that the competitive pattern in the elevator industry was improving, prices stopped falling, and profitability recovered markedly. The net interest rate for the first three quarters was 7.91%, an increase of 1.44pct over the same period last year. Net profit for the full year is expected to increase significantly compared to last year, mainly because Hitachi's investment income will continue to grow at a high level, and there will be no further impairment in 2019 when Songxing Electric's goodwill accrued by 60 million in '18. Furthermore, Xinzhu Shares has already calculated an impairment of 187 million yuan, so it is unlikely that it will continue to be impaired. Three fees were controlled, operating cash flow changed from negative to positive, accounts receivable as a share of revenue decreased, and the aging structure was healthy: ① The sales expense ratio for the first three quarters was 2.72% (-0.31pct), mainly because the year-on-year growth rate of sales service fees was only 0.55%, far lower than the 11.92% growth rate of revenue; the management expense ratio was 6.4% (-0.4pct), mainly due to the year-on-year reduction in labor costs; ② Net operating cash flow changed from negative to positive to 138 million, up 529.66% year on year, mainly due to the increase in sales repayment, the company's capital on the bank account 1.57 billion It is relatively abundant and there is no risk of capital turnover. ③ Accounts receivable for the first three quarters decreased by 5.43 million year-on-year, accounting for 31.07% of revenue, and the structure is relatively healthy. At the same time, the company began to strengthen the collection of notes receivable. The number of notes receivable decreased by 22.73% compared to the same period last year. The overall receivables risk is not significant. All sectors are actively expanding their business, and R&D is being carried out simultaneously. Guangri Elevator promoted testing of air conditioning projects and achieved batch supply; developed new orders for Zhongshan Fubi and Zhuomeney cables; at the same time, strengthened cooperation and negotiations with key customers such as Suzhou Kangli Elevator and Otis to seek business such as wire and cable, sheet metal, and transformers. By actively expanding downstream business, we ensure the company's continued healthy and diversified long-term operation. Research and development efforts have been maintained. Projects such as Hitachi Elevator's “Energy-Efficient Small Computer Room” have received good feedback. The company's R&D expenses in the first three quarters were 172 million yuan, an increase of 22.2% over the previous year, accounting for 3.81% of revenue. Upgraded to a “Highly Recommended - A” rating. The company's business includes elevator assembly manufacturing, sales and engineering services, elevator parts manufacturing and logistics distribution services, covering the entire elevator industry chain. Currently, elevators are the core product, and the upstream and downstream industrial chain continues to expand. Driven by the three factors of “the arrival of the elevator renewal cycle, the installation of new elevators in old houses, and the expected inflection point of completion”, we believe that the company's performance in '19 is expected to stop its decline and improve. It is expected that net profit from 19/20 will rise back to 480 million and 610 million, corresponding to 19/20 PE 15 times and 11 times. Based on the judgment that the current round of elevator industry prosperity can be maintained for 2-3 years, the company's rating was raised to “Highly Recommended - A”. Risk warning: prices are falling too fast, real estate investment growth is falling more than expected, raw material prices fluctuate