Incident: In the first three quarters of 2020, the company achieved revenue of 1,424 billion yuan, down 2.27% year on year; net profit to mother of 161 million yuan, down 10.19% year on year; net cash flow from operating activities was 155 million yuan, up 166.25% year on year; EPS was 0.53 yuan/share, down 10.17% year on year; weighted average ROE was 9.47%, down 2.38pp year on year. Comment: 1. The operation is relatively steady, revenue and profit improved month-on-month, and the company's operation is relatively steady. The company's revenue for the first three quarters was 1,424 million yuan, -2.27% year-on-year, 4.56pp narrower than H1; net profit to mother was 161 million yuan, -10.19% year-on-year, and the growth rate narrowed 5.68 month-on-month; revenue and profit growth rates all improved. On a quarterly basis, Q1/Q2/Q3 achieved revenue of 313 million yuan/559 million yuan/552 million yuan, respectively, of -26.14%/+9.17%/+5.93% year-on-year; net profit to mother was 30 million yuan/66 million yuan/65 million yuan, respectively, -46.99%/+14.89%/-0.35%, respectively. Net profit remained flat year-on-year. The resumption of work and production+ strong demand during the rainy season and flood season may have provided strong support for Q2 results, and Q3 returned to normal. 2. The cost ratio increased during the expansion period, and the cash flow situation was still good. The company's gross sales margin for the first three quarters of 2020 was 25.77%, -0.26pp year on year. The cost rate for the period was +1.05pp to 10.87% year-on-year. Among them, the sales/management/R&D/finance ratio was 4.18%/3.56%/3.36%/-0.23%, respectively, +0.28pp/+0.42pp/+0.35pp, respectively, and the financial expense ratio remained the same year on year. Net sales margin was 11.32%, -1.00pp year over year. The company's balance ratio was +2.90pp to 18.86% yoy, -3.00pp month-on-month. The company is in a period of capacity expansion, capital requirements are high, and there is plenty of room for leverage under the current asset structure. The net cash flow generated by the company in the first three quarters was 155 million yuan, up 166.25% year on year, of which the third quarter was 89 million yuan, up 1.82% year on year. The company's cash flow situation was relatively good, mainly due to an increase in cash received from products sold and a decrease in purchase payment expenses during the reporting period. 3. There is a large demand space on the engineering side, and additional capital is being raised to promote the expansion of the company's main products, PVC, PE, and PPR pipelines. The company's distribution share is relatively high. Currently, direct sales channels are being increased. Downstream demand mainly comes from real estate business and municipal engineering, sponge cities, beautiful villages, coal-to-gas, and old renovation policies to boost municipal pipe demand. The refinement policy promotes the increase in demand for high-end high-quality real estate pipe collection, and the company's market share is expected to increase further. As the retail market recovers, home renovation is driving demand on the C-side. The company currently has six major industrial bases, with a production capacity of 360,000 tons at the end of '19, and 150,000 tons. The Hainan base began trial production this year. The capital of the Henan base was increased by 10 million yuan in July, and the investment and construction of the Yunnan base is progressing steadily. In June this year, a fixed increase plan was announced to raise no more than 501 million yuan to invest no more than 501 million yuan in the PVC/PPR//PE high-performance polymer composite project with an annual output of 70,000 tons in Yunnan, new pipes and application technology research and distribution projects. After the implementation of each project, the company had sufficient production capacity reserves. While deeply cultivating the South China market, it further expanded production capacity and location advantages, stabilized the central China market, and expanded the southwest China market. 4. High-quality development of new pipe products, maintaining the “Highly Recommended - A” rating company as a leader in plastic pipelines in South China, and its main business operation is steady. The penetration rate of fine decoration continues to increase, downstream real estate customers are concentrated, environmental protection is becoming stricter, and the concentration of the plastic pipeline industry is expected to further increase. The company continues to promote off-site expansion, deepen the national production capacity layout, seize empty markets, and increase its competitive advantage. The completion and commissioning of industrial bases in Hainan and Yunnan is expected to drive continued growth in performance. We expect the company's EPS to be 0.96 yuan and 1.23 yuan respectively in 2020-2021, and the corresponding PE will be 13.4 times and 10.5 times respectively, maintaining the “Highly Recommended - A” rating. 5. Risk warning: the growth rate of infrastructure investment has declined, the price of raw materials has risen sharply, and production capacity investment falls short of expectations