Description of the incident Recently, the company released a report for the third quarter of 2019. From January to September 2019, the company achieved revenue of 525 million yuan, a year-on-year increase of 40.05%; realized net profit of 80 million yuan, an increase of 70.06% over the previous year, and realized net profit without deduction of 80 million yuan, an increase of 95.92% over the previous year. Incident review Q3 revenue and performance nearly doubled, and cash flow improved markedly: in the 3rd quarter, the company achieved revenue of 212 million yuan, an increase of 108.82% over the previous year; net profit to mother of 30 million yuan, an increase of 96.41% year on year, and revenue performance in single Q3 nearly doubled. The company's smart street lamp orders are growing at an accelerated pace, and the share of revenue continues to rise, driving an improvement in gross margin. The company achieved a gross profit margin of 37.61% in the first 3 quarters, up 4.27 pcts year on year, and 35.39% gross profit margin in the 3rd quarter, up 0.37 pct year on year. Due to price control by some project owners, gross margin fell 4.91 pcts month-on-month in the 3rd quarter, which is still within a reasonable range of fluctuations. The company strengthened repayments. The net cash flow from operating activities in the 3rd quarter was -0.19 million yuan, and the cash outflow narrowed significantly. Considering that government projects are generally repaid in large quantities in Q4 and before the Spring Festival, it is expected that the company's cash flow will still improve significantly in Q4. Smart street lamp orders are plentiful, consolidating the high growth trend in the future: benefiting from the accelerated volume of the domestic smart street lamp market and the gradual transformation from small-scale demonstration zone projects to large regions, the company's smart street light orders are growing rapidly. Currently, orders for smart street lights are currently in process about 1.6 billion yuan. Affected by accounting policies and the time of acceptance of the company's projects, the company's projects under construction were unable to confirm current revenue according to the progress of the project, causing a mismatch between the revenue growth rate and the size of orders in progress. We believe that the company's large orders are expected to gradually be implemented in the next 1-2 years. As new orders continue to be placed in the future and revenue recognition methods are further improved, the company's future performance can be expected to continue to grow at a high rate. The wave of 5G construction is about to rise, helping Huati transform from products to operations: The domestic 5G construction wave is about to rise, and core cities and second- and third-tier cities have introduced smart street light construction plans to meet the needs of 5G light pole station construction. The company joined hands with the University of Electronic Science and Technology to accumulate core technology reserves, increase competitive barriers, join forces with Tencent's smart city IoT portal, and deeply bind Huawei to benefit from the 5G small base station construction wave. In the future, it will achieve transformation from traditional street light sellers to smart city operators and 5G base station supporting manufacturers. It is expected to break through the valuation shackles of traditional industries and enjoy technology stock valuation premiums. Investment advice: The company currently has plenty of orders for smart street lights, and its performance is at an inflection point. We estimate that the company's net profit from 2019 to 2021 will be 142 million yuan, 211 million yuan, and 312 million yuan, corresponding to 36 times, 24 times, and 16 times PE. Risk warning: 1. Smart city and 5G construction fall short of expectations; 2. Orders for traditional urban road lighting and landscape lighting fell short of expectations.