The results were in line with expectations and were briefly under pressure in the first quarter: the company's operating income in 2019 was 286 million yuan, an increase of 19.09% over the same period last year; the net profit attributed to shareholders of listed companies was 78.9452 million yuan, an increase of 6.67% over the same period last year; and the net cash flow generated by operating activities was 68.1833 million yuan, an increase of 12.73% over the same period last year.

Overall performance maintained rapid growth in 2019, in line with expectations. The slight increase in the company's operating income in 2019 compared with the previous period is mainly due to the periodic adjustment of consumer electronics, automotive electronics and other industries, with continuous international trade frictions. due to the wide distribution of customers served by the company, the overall operation of the company is stable, business income continues to grow, and operating costs increase accordingly. The company's gross profit margin for 2019 was 69.58%, slightly lower than the same period last year. At the same time, the company's annual expenses increased compared with the previous quarter, mainly due to increased R & D investment, exchange rate changes and deposit interest during the reporting period, resulting in an increase of 41.05% and 60.46% respectively in R & D expenses and R & D expenses. Affected by the epidemic, the company's operating income in the first quarter of 2020 was 42.0431 million yuan, down 25.33 percent from the same period last year; the net profit attributed to shareholders of listed companies was 7.972 million yuan, down 28.52 percent from the same period last year, and short-term performance was under pressure; the net cash flow generated by the company's operating activities was-18.5212 million yuan, down 408.04 percent from the same period last year. The company's gross profit margin in the first quarter of 2020 was 64.75%, down from the same period last year. At the same time, the company's expense rate during the first quarter of 2020 was higher than that in the first quarter of 2019. The sales expense rate, management expense rate, R & D expense rate and financial expense rate were 26.84%, 15.85%, 17.15% and-7.04%, respectively, with year-on-year growth of 29.53pct, 9.55pct, 47.72pct and 2413.48pct. The increase in expense rate during the period is mainly due to the increase in the amount of exchange earnings affected by exchange rate changes in the current period.

The development of industrial Internet has brought new application scenarios, and the company's brand effect has been continuously strengthened: with the development of industrial Internet of things application technology, Industrial big data is being valued by enterprises as its core asset, and a variety of application scenarios have been continuously developed. Enterprises can use big data to find hidden value, build accurate data exchange from collection, analysis, transformation, feedback and other links to achieve personalized and intelligent upgrade. The company firmly grasp the opportunities for the development of the industry, enhance the market value of products, and accelerate the layout of the industry. The brand effect of the "ConST" brand produced by the company has been continuously strengthened in the domestic market, with year-on-year growth in revenue in the areas of metrology and testing, petrochemical, metallurgical machinery, transportation, food and pharmaceuticals, among which the sales revenue of digital stress testing products was 244 million yuan, an increase of 16.6% over last year. The sales revenue of temperature calibration products was 38.52 million yuan, an increase of 39.3% over last year. The company's high-end pressure technology is in a leading position in the world. In the future, we will pay close attention to the digital development trend and the domestic rapid development period, accelerate industrial upgrading and digital information construction, and enter the first echelon of the global industry.

Continue to increase R & D investment, consolidate the industry leading position: the company drives development with innovative technology, and continues to consolidate its leading position in the industry. From 2015 to 2019, the company's R & D investment totaled 161.1998 million yuan, accounting for 55.4% of the total net profit during the period. In 2019, the company's R & D expenditure totaled 52.6724 million yuan, an increase of 19.24% over the same period last year, accounting for 18.39% of operating income. The average product R & D cycle of the company is 2-3 years, and a total of 21 hardware products, 3 software systems and 6 professional solutions have been launched in two categories and eight series. In 2019, we will continue to improve the application range of medium and high-end pressure testing products and expand the range of temperature testing products. The company continues to integrate pressure sensor application technology and detection technology, adaptive control technology, dynamic environment compensation technology, dual temperature zone temperature control technology, power grid fluctuation compensation technology, wireless bus technology, extended IT technology, NB-IoT Internet of things technology, etc., to ensure the competitiveness of products with the annual R & D investment accounting for no less than 15% of revenue. At present, the technology of some high-end pressure products has been in the lead in the world. By the end of 2019, the proportion of domestic pressure testing patents and temperature and electricity patents was about 10:4. The dual-engine model of pressure testing and temperature testing provides a strong guarantee for the company's trend growth. Four series of new temperature testing products developed by the company for many years have been on the market one after another after 2018, and the upgraded temperature and humidity testing products of the subsidiary Changfeng Zhiyuan have also quickly enriched the company's product line.

Investment advice: the company's performance is in line with expectations, continue to increase R & D investment, brand market position has been further strengthened, is expected to fully benefit from the wave of industrial Internet development. We predict that the EPS of the company from 2020 to 2022 is 0.56,0.68,0.79 yuan respectively, and the corresponding PE is 25.59,21.25,18.11 times respectively. Maintain the recommended rating.

Risk tips: overseas epidemic risk; international trade dispute risk; downstream demand downturn risk; fund-raising projects are not as expected; accounts receivable bad debt risk; technical personnel loss risk.