Q3 Performance growth is accelerating, and profitability continues to increase: The company's main business scope includes design, production, installation, repair and maintenance of elevators, escalators, moving walkways and intelligent mechanical parking equipment, platform shielding door equipment, design and production of elevator electrical parts and related electrical products, elevator rails and related spare parts, auto parts, etc. The company achieved operating income of 4.937 billion yuan in the first three quarters of 2020, an increase of 9.08% over the previous year; realized net profit attributable to shareholders of listed companies was 528 million yuan, an increase of 46.23% over the previous year. Among them, Q3 achieved revenue of 1,979 million yuan in a single quarter, an increase of 14.15% over the previous year; net profit attributable to shareholders of listed companies was 216 million yuan, an increase of 180.21% over the previous year, and performance growth in a single quarter accelerated. The company's net cash flow from operating activities in the first three quarters was 191 million yuan, a significant improvement over the previous year, mainly due to a year-on-year decrease in payment material purchases.

The company's gross sales margin for the first three quarters of 2020 was 14.20%, a slight increase of 0.38 PCT over the same period last year. Among them, the gross sales margin for Q3 was 15.24%, an increase of 0.81 pct over Q2. The results in cost reduction and efficiency were remarkable, and profitability continued to increase. Meanwhile, the company's sales expenses, management expenses, and R&D expenses for the first three quarters were 136 million yuan, 295 million yuan, and 169 million yuan respectively, with year-on-year increases of 10.15%, 1.65%, and -2.12%, respectively.

The rail transit and refurbishment business continues to advance, and there are sufficient orders in hand: the elevator industry has now entered a period of industrial maturity, competition in the industry is more intense, and competition for homogenization is serious. Since the second quarter, as the domestic epidemic prevention and control situation has continued to improve, and under the influence of the government's economic stabilization policy, the resumption of work and production has accelerated. Favorable market segmentation policies such as elevator installation and renovation have led to a recovery in the growth rate of elevator sales volume. The elevator installation business in old neighborhoods is worth focusing on. At the same time, relevant policies have stepped up the development and construction of rail transit systems represented by high-speed railways and subways, and rail transit station facilities have become a strong growth point in elevator market demand. The Guangzhou Metro project includes 10 lines. Among them, the Guangzhou Metro Line 3 East Extension Section, Line 5 East Extension, Line 12, Line 13 Phase II, and Line 22 contracts are executed by Guangri Elevator. The total contract amount for the five line procurement (including installation) projects is RMB 1,162 billion; the Guangzhou Metro Line 7 Phase II, Line 10, Line 11, Line 14 Phase II, and Line 18 contracts are executed by Hitachi Elevator. The total contract amount for the five line procurement (installation included) projects is currently RMB 1,640 billion. The company disclosed. The elevator equipment for part of the project line has already been entered Delivery schedule stage. At the end of the reporting period, the company's inventory was 998 million yuan, up 10.29% year on year, contract liabilities were 870 million yuan, and the company's interim report revealed contract liabilities of 811 million yuan. The rapid increase in inventory and contract liabilities indicated that the company had sufficient orders on hand.

R&D projects are progressing in an orderly manner, and the national marketing engineering service network provides a one-stop service experience: the company has a history of manufacturing complete elevator machines for nearly 50 years, has a strong elevator R&D team and strong scientific and technological strength. The company's interim report revealed that the Guangri Joint Stock Research Institute has established 17 technology research and development projects, including key technology integration and product development for smart elevators, smart logistics platforms, and intelligent inspection systems for EMUs. Currently, all projects are progressing effectively according to the plan. The company has further established a market network and strategic cooperation advantages. The company's national elevator marketing engineering service network covers sub-branches, service centers, offices and a growing dealer network. It sells Guangri brand elevators and provides engineering services to global customers, forming a marketing service network with wide coverage and rapid response. The company has set up a Guangri Elevator Customer Service Center integrating a hotline center, a technical support center and a remote monitoring center. Relying on the Internet and IoT technology based on big data, it has realized intelligent services for elevators and escalators, reduced equipment downtime, reduced failure rates, detailed maintenance process information, and provided customers with the most thoughtful and differentiated one-stop service, and achieved a seamless connection between pre-sales, in-sales and after-sales services.

Investment suggestions: The company's Q3 performance increased rapidly, operating cash flow improved significantly year-on-year, gross margin increased steadily, various businesses continued to advance, and there were sufficient orders on hand. We predict that in 2020-2022, the company's EPS will be 0.70 yuan, 0.77 yuan, and 0.85 yuan, respectively, and the corresponding PE will be 11.32 times, 10.32 times, and 9.38 times, respectively. Maintain the “Recommended” rating.

Risk warning: The impact of the global pandemic continues; industry competition intensifies; orders fall short of expectations; risk of raw material price fluctuations; R&D progress falls short of expectations.