The performance in the first three quarters is under pressure, and the gross profit margin has declined: the company is mainly engaged in the research and development, production and sales of flat panel display automation module assembly equipment. The company's equipment products have high technical content and high degree of automation, which are mainly used in the module assembly process of the rear part of the flat panel display panel, that is, the module assembly process of related components such as TDT-LCD, OLED display modules and touch screens. The company achieved an operating income of 573 million yuan in the first three quarters of the year, an increase of 16.49% over the same period last year, and a net profit of 49.4342 million yuan, a decrease of 12.54% over the same period last year. Of this total, Q3 achieved an operating income of 221 million yuan in a single quarter, an increase of 49.42% over the same period last year, and a net profit of 11.7446 million yuan, down 13.36% from the same period last year.

The net cash flow generated by the company's operating activities in the first three quarters was-40.3001 million yuan, down 141.34% from the same period last year, mainly due to the decrease in repayment for goods sold and the increase in payment for goods. During the reporting period, the company's gross sales margin was 27.61%, down 4.31 PCT from the same period last year. At the same time, the company's sales expenses, management expenses and financial expenses were 30.2932 million yuan, 26.1403 million yuan and 7.6172 million yuan respectively, with year-on-year increases of 41.92%, 6.20% and-17.44% respectively, of which the increase in sales expenses was mainly due to the increase in sales staff fees and after-sales service fees. During the reporting period, the company's R & D expenses totaled 42.5276 million yuan, accounting for 7.24% of operating income, down 6.66% from the same period last year.

Wuxi Lianpeng, a newly established subsidiary, photovoltaic equipment business is expected to become a new bright spot: the company registered and established Wuxi Lianpeng New Energy equipment Co., Ltd on September 23, and now the company has officially started operation. The company disclosed that the equipment experience of the cooperation team of Wuxi Lianpeng New Energy equipment Co., Ltd. is mainly in photovoltaic modules. The DH180S bus belt welding equipment developed and produced as the main push product has the advantages of functional beat ≤ 23s, high speed, strong compatibility, compatibility and compatibility, the equipment experience of the cooperation team of Wuxi Lianpeng New Energy equipment Co., Ltd. is mainly in photovoltaic modules. The welding precision is high, the specification conversion is convenient, and it has the function of punching at the end of the catchment belt, which can be fed on one side and easy to operate. As a leading product and cornerstone in the field of photovoltaic battery equipment in subsidiary companies, stack welders are expected to achieve revenue and economic benefits soon. In the future, the company plans to cover component-end welding systems and battery manufacturing process equipment to create new profit growth points in the component field.

The strength of OLED rear module equipment is leading, and the field of large-size module assembly has been ordered: the company is a leader in the field of OLED module equipment. At present, OLED related equipment has OLED Pollami laminating equipment, OLED 3D curved surface lami laminating equipment, OLED COF, FOF binding equipment and OLED bending equipment, etc., and have achieved mass production. The company has won large orders from head companies such as BOE and Vicino, and previously supplied BOE 3D laminating equipment and polarizer placement machine to fully demonstrate the competitive advantage of the company's OLED equipment. In the field of LCD, the company uses the independently developed FOG bonding machine based on TFT technology to enter the field of high-end products and successfully binds to Shenzhen Tianma, BOE and other high-quality customers. In the face of greater market opportunities in the large-size field, the company actively promotes the research and development of large-size module bonding equipment and the expansion of the whole line of TV modules, so as to form a competitive advantage of products in order to cultivate new profit growth points. the company has launched new products in the field of large-size module assembly and formed sales orders. With the substantial growth of investment from downstream panel manufacturers, the company will actively explore the equipment demand of new production lines. With the acceleration of equipment import substitution, the company is expected to further open up the growth space.

Fully cut into the field of automotive electronics applications, semiconductor equipment business to ensure long-term development: at the beginning of 2019, the company announced that it had obtained the supplier qualification of Continental Germany Group, one of the world's top 500 suppliers of automotive accessory products, and officially entered the supply chain system of Continental German Group, indicating that the company has made a breakthrough in automotive screen production module equipment. In 2019, the company signed sales orders with Continental Group totaling 74.6958 million yuan, all of which are high-end model production lines. The brand-new application field of automotive electronics with broad market space will help the company to further expand the application scope and fields of the company's product line and create new performance growth points for the future. As the demand for semiconductor products is driven by 5G and intelligent applications, the sales scale of semiconductor equipment is expected to continue to grow. The company is actively laying out the field of semiconductor packaging equipment. At present, the COF flip closed test equipment developed and sold by the company has reached the mass production standard and formed a formal order, and has active business negotiations with other potential customers. The company recently disclosed that the COF flip equipment has been delivered to the production site of Wuxi Infineon Company and is currently in the commissioning stage. In the near future, similar equipment will also be delivered to the production site of Infineon in Malaysia, which will lay the foundation for the company's long-term development.

The company announced a fixed increase plan of 800 million yuan, major shareholders and actual controllers participated in demonstrating confidence: the company previously announced that it intended to issue no more than 43226241 RMB common shares (A shares) to no more than 35 specific objects, including Mr. Nie Quan, the company's controlling shareholder and actual controller. no more than 30% of the total share capital of the issuer before this non-public offering, and the funds raised shall not exceed 800 million yuan. Of these, 240 million yuan is used for "Automotive Electronic display Intelligent equipment Construction Project", 160 million yuan for "large-size TV Module Intelligent equipment Construction Project", and 160 million yuan for "Semiconductor closed Test Intelligent equipment Construction Project". The company plans to raise no more than 800 million yuan to invest in the previous strategic layout of automotive electronic intelligent display equipment, large-size TV module intelligent equipment and semiconductor closed testing intelligent equipment, which will help to further enrich the product structure, enhance the company's comprehensive competitiveness, and open up the company's growth space. Mr. Nie Quan, the company's major shareholder and actual controller, intends to participate in Dingzeng, which also demonstrates his confidence in the company's business layout and future development. At present, the fixed increase has been over, and it is expected that it will inject strong impetus into the sustainable development of the company in the future.

Investment advice: the company's performance in the first three quarters is under pressure, the new layout business is growing rapidly, and the increase will inject a strong driving force into the company's sustainable development. It is estimated that from 2020 to 2022, the corresponding EPS of the company will be 0.62,0.84,0.98 yuan respectively, and the corresponding PE will be 48.80X, 35.93X and 30.82X respectively, maintaining a "highly recommended" rating.

Risk hint: the competition in the industry intensifies, the progress of product research and development is not as expected, and the order situation is not as expected.