The electronic components distribution industry is in the middle of the industrial chain. It plays a leading role in driving up and down, and is an indispensable middle link in the industrial chain. After years of development, the domestic electronic components distribution industry has a market size of over trillion dollars. Local distributors have grown rapidly to seize the market, and can keep pace with international distributors in the domestic electronic components distribution market. However, compared with the international electronic components distribution market, the market concentration of the domestic distribution industry is still at a low level. The share of sellers in the top three points of revenue in the top ten is 46%, far lower than the share of 77% of the global market, and there is still a lot of room for improvement in industry concentration. Leading local electronic component distribution companies can rely on capital and channel advantages to replicate the rise path of international electronic component distribution giants, achieve expansion through mergers and acquisitions, and promote further concentration of the competitive pattern in the domestic electronic components distribution market to the top. The core competitiveness of the company's rapid development within the industry is that the company can continue to acquire high-quality electronic distribution companies and use its excellent management capabilities to carry out integrated development. Since 2015, the company has quickly entered the field of electronic component distribution through the acquisition of electronic component distributors such as Xianghai Electronics, Pengyuan Electronics, and Xinfei Electronics, etc., and has quickly entered the first tier of the electronic components distribution industry in just a few years. The distribution companies chosen by the company to acquire have been deeply involved in their respective industry segments for many years. They have outstanding distribution capabilities, considerable room for performance growth, and are more competitive compared to competitors in the same industry. Under the company's management integration and group endorsement, the acquired company further strengthened its original distribution business and exceeded its performance commitments during the performance commitment period, helping the company's revenue scale to reach new highs. It can be seen from this that the company already has a mature set of mergers and acquisitions logic and replicable expansion strategies, and there is strong certainty about the growth of the company's business scale. In May 2018, the company formed Huaqiang Semiconductor Group and incorporated component distribution companies such as Xianghai Electronics and Pengyuan Electronics into it. After the establishment of Huaqiang Semiconductor Group, the company will further deeply integrate the company's authorized distribution business of electronic components to improve management and channel efficiency through measures such as building an IT information system integrating business finance; enhance the company's negotiation ability and core competitiveness in project mergers and acquisitions, product line development and new customer development by aggregating the resources, advantages and strength of the company's authorized distribution companies; at the same time, build a unified “Huaqiang Semiconductor Group” brand image on the basis of strengthening the respective brand characteristics of each authorized distribution company. The company relies on a system independently developed by Jieyang Communications Technology to develop online electronic components trading business and serve the long-tail demand market. In December 2019, the company plans to integrate the company's Jieyang Communications Technology and Electronic Network Company to establish Huaqiang Electronic Network Group. The establishment of Huaqiang Electronics Network Group will help Jieyang Electronics Technology and Electronic Network Company further develop synergies in business, customers, talents, channels, brands, transaction data, etc., promote the rapid development of the company's long-tail demand service business for electronic components and related products, and improve the company's layout in the electronic components distribution industry, thus effectively complementing the company's traditional authorized distribution business and jointly promoting the company's performance growth. Investment advice: Without considering the impact of the company's potential future mergers and acquisitions on the company's performance, we expect the company's main business revenue in 2019-2021 to be 13.787 billion yuan, 16.152 billion yuan and 18.479 billion yuan respectively. The net profit attributable to the parent company is 688 million yuan, 786 million yuan and 893 million yuan respectively, EPS is 0.66 yuan/share, 0.75 yuan/share and 0.85 yuan/share, corresponding PE is 21.81 times, 19.11 times and 16.81 times, respectively. As an electronic distribution enterprise that has grown rapidly in recent years, the company has strong competitiveness in terms of capital, management, scale, and resource integration. We are optimistic that the company can continue to grow steadily along the “extraction+endogenesis” model and stand out in the process of gradually increasing industry concentration. This year, the company's profit was under pressure due to low downstream prosperity, but with the recovery of the downstream industry, the company's profit level is expected to rise. It was covered for the first time, and a “increase in holdings” rating was given. Risk warning: The development of corporate mergers and acquisitions falls short of expectations; downstream demand in the electronics industry continues to be sluggish; inventory and accounts receivable risks.