Events: on October 28, the company released the third quarter report of 2020, showing that in the first three quarters of 2020, the company achieved operating income of 1.058 billion yuan, down 30.19% from the same period last year; the net profit belonging to the shareholders of the parent company was-75 million yuan, down 4.01% from the same period last year; deducting the non-return net profit was-93 million yuan, down 4.92% from the same period last year; basic earnings per share was-0.47 yuan.

Short-term performance is under pressure to accumulate long-term development advantages. In the first three quarters of 2020, the company achieved operating income of 1.058 billion yuan, down 30.19% from the same period last year, mainly due to the reduction of the scale of non-independent products that lacked core competitiveness in the first three quarters, resulting in a decrease in revenue from the radar sector and the security sector. During the reporting period, the company's radar plate production, safety plate construction increased, inventory increased 1.18% compared with the same period last year; special industrial park construction continued to invest, construction in progress increased by 81.32%; Bo Wei Changan prepaid perception low-altitude capacity improvement project increased, and reclassified to other current assets, resulting in an increase of 86.72% in other current assets. The company continues to focus on the main responsibility, divest the business of non-independent products, and operate under pressure in the short term. However, by constantly promoting the optimization of the industrial chain structure, checking the access of scientific research projects, and accumulating innovative strength with core competitiveness, the company is expected to achieve long-term sustainable development.

The rate increased slightly, and the factoring financing funds of the security sector were accounted for. During the reporting period, the company's rates increased by 7.83 percentage points compared with the same period last year. Among them, due to the increase in interest expenses caused by the factoring financing of the new Ping an City project and the decrease in write-downs due to the decrease in receivables from the security sector compared with the same period last year, the financial expenses increased by 42.90% year-on-year, and the management expenses increased by 8.03% year-on-year. Sales expenses decreased by 38.19% year-on-year, and R & D expenses decreased by 22.24%. In the first three quarters, the company's radar sector and Bowei Changan perceived low-altitude project rebates decreased, making the net cash flow generated by operating activities decreased by 33.51% compared with the same period last year; Bo Wei Changan paid for low-altitude radar capacity improvement project investment increased, making the net cash flow generated by investment activities decreased by 17.37% compared with the same period last year. Due to the receipt of factoring financing funds from the security sector, the net cash flow generated by the company's fund-raising activities increased by 350.41% compared with the same period last year.

The company has won a number of radar projects and is expected to benefit continuously during the 14th five-year Plan period. The company deeply ploughed the civil aviation air traffic control radar market, participated in the formulation of the 14th five-year Plan of CAAC, won the bid for two ATC radar overhaul projects, and won the second radar project of China Flight Test and Research Institute. In addition, the company has actively done a good job in the after-sales service of ATC and the delivery of the whole aircraft of military and civil aviation ATC, and successfully completed the on-site acceptance of ATC primary and secondary integrated radar system in Taiyuan, Shanxi Province; Bowei Changan's radar improvement project has entered the stage of engineering development. The company has successfully developed a highly integrated microwave digital composite substrate with independent intellectual property rights, which is conducive to improving the company's competitiveness in microwave, 5G communications, anti-collision radar and other market segments.

CLP Bo Weizi Group is the only listed platform and continues to be optimistic about the value of the company's platform. The 38 Institute of China Electric Science, the controlling shareholder of the company, is China's first-class military and civilian radar development and production base, which has a strong comprehensive strength in electronic information technology and system engineering. Relying on the advantages of 38 high-quality assets and resources of CLP, the company continues to expand its radar business. Coupled with the acceleration of resource integration within Weichang Anzi Group, the company as the only listed company under the sub-group, the platform value is prominent, or will continue to benefit.

Profit forecast and investment advice: we predict that the company's income from 2020 to 2022 will be 47.77max 59.45 / 7.138 billion yuan, an increase of 30.13%, 24.45%, 20.06%, and a net profit of 1.45 / 1.81 / 217 million yuan, 30.49%, 24.82%, 20.00%, respectively, and the corresponding PE is 46.35 / 37.13 / 30.94 times. Maintain a "buy" rating.

Risk tips: accounts receivable is lower than expected; market competition and price risk; policy risk.