Investment highlights: The company announced its 2019 performance report. During the reporting period, the company achieved operating income of 2,470 billion yuan, a year-on-year decrease of 6.27% (of which Q4 was 911 million yuan in the single quarter, an increase of 8.58% over the previous year); realized net profit of 332 million yuan, a year-on-year decrease of 12.73% (of which Q4 had a profit of 113 million yuan in a single quarter, a year-on-year decrease of 5.83%). The performance was under pressure in the short term and was in line with market expectations. Revenue was corrected in a single quarter, and the decline in profit narrowed, but in line with market expectations. Q4 The revenue growth rate in the single quarter was positive, and the decline in profit growth was reduced. The driving force is expected to come from finance and logistics. By business, the recovery in Q3 gross margin is a verification (3.24pct improvement over the previous month), which is expected to continue until 2020; 2) In terms of logistics, logistics cabinet shipments resumed in 2019H2, which is expected to benefit from good orders in the fourth quarter; 3) On the retail side, major customer shipments fell short of expectations, but small and medium operators made breakthroughs in the third quarter, and customer development trends accelerated. 2019H2 2019H2 retail sales continued to be under pressure, but the share of financial business increased. The proof is that Q3 gross margin improved by 3.24pct month-on-month and 1.51pct year-on-year. The company's general gross margin distribution by product sector is 50% + for core components, 45% to 50% for finance, 40% to 45% for retail, and 35% to 40% for logistics. The increase in the company's gross margin in the third quarter was mainly due to an increase in the share of financial business. 1) STM began shipping in the third quarter, and New Beiyang had the advantage of core components; 2) Benefiting from the wave of sorting machine changers and industry policy dividends, sorting machine revenue doubled in the first three quarters, and has already exceeded 18 full year revenue. 2019H2 Operating cash flow has improved significantly, and cash flow management goals have been met. The company's net operating cash flow declined rapidly in 2018. Increased repayment targets were proposed in early 2019, 2019H1 net operating cash flow was corrected, 2019Q3 cash flow continued to improve significantly, and cash flow management targets were achieved. Advance payments at the end of the period increased by 143.84% compared to the beginning of the period/inventory increased by only 21.79% compared to the beginning of the period (and mainly for products issued), which was the main reason for the improvement in cash flow and a sign of improved performance in the fourth quarter. Short-term performance was under pressure, and the rating was downgraded to “increased holdings”. The company's financial business is prosperous and is expected to be highly sustainable, but the adjustment of orders from some major customers in the new retail industry and logistics industry has led to a decline in annual performance. There is still uncertainty about the development of new retail business. Short-term performance is under pressure, and profit forecasts have been lowered. The original forecast for 2019 to 2021 was revenue of 3.174 billion yuan, 3,988 billion yuan, and 5.023 billion yuan, while net profit was 480 million yuan, 591 million yuan, and 730 million yuan. After adjustments, it is estimated that the operating income for 2019 to 2021 is 2,470 billion yuan, 2,878 billion yuan, and 3.37 billion yuan, and net profit of the mother is 332 million yuan, 368 million yuan, and 447 million yuan. There is still uncertainty about the development of new retail business, and the inflection point in the industry still needs to wait. It is downgraded to “increased holdings” rating.