Incident: The company released its 2019 annual report, achieving revenue of 22.12 billion yuan (+4.2%), net profit to mother of 1.08 billion yuan (-14.9%), and deducting non-net profit of 1 billion yuan (-16.7%). Short-term performance is under pressure, which is in line with expectations. Short-term gross margins are under pressure, and profitability has declined. In 2019, the elevator, escalator and lift industry produced 1.1173 million units (+12.8%), and the company achieved elevator production and sales volume of 88,000 units and 89,000 units respectively, up 6% and 10% year-on-year, slightly lower than the market average. Competition in the elevator market is still fierce, and the company's sales volume is expected to be under pressure. The elevator business achieved revenue of 20.82 billion yuan (+4.8%) in 2019. The growth rate was lower than the sales growth rate, achieving a gross profit margin of 16.5% (down 2.7 pp), causing the company's overall profit level to decline. The company achieved revenue of 5.5 billion yuan (+3.3%), net profit to mother of 220 million yuan (-7.5%), and gross profit margin of 16.4% (down 0.8 pp year on year, up 0.1 pp from month to month). The profit decline narrowed, and the performance was in line with expectations. The renovation of old ladders, the demand for renovation of old houses is improving, and it is worth paying attention to. In terms of old elevator renovation, at the end of 2019, there were nearly 7 million elevators in use in China. Among them, the number of old elevators that have been in operation for more than 15 years is increasing year by year, and demand for old elevator renovation is being released year by year. The subsidiary Shanghai Mitsubishi Elevator has actively participated in the renewal of old elevators in Shenzhen residential areas, etc. So far, it has updated nearly 700 old elevators for residential areas in Shenzhen, and the company expects a year-on-year increase of more than 50% in 2019. In terms of refurbishing old houses, due to historical reasons, there are a large number of six- and seven-story multi-storey buildings across the country that have not been equipped with elevators. In order to make it easier for residents to travel, especially to solve the problem of convenient travel for the elderly, local governments encourage and support the installation of elevators in old houses as a major livelihood project. By the end of 2019, the subsidiary Shanghai Mitsubishi Elevator had launched 30 one-stop service centers nationwide. In 2018, the subsidiary Shanghai Mitsubishi Elevator completed the installation of 3,000 elevators in the old house, and the business grew by more than 30% in 2019. Profit forecasting and investment advice. The company's elevator business has a stable position in the industry, contributing sufficient cash flow, and diversified expansion to create new profit growth points. The company's EPS from 2020 to 2022 is expected to be 1.06/1.19/1.37 yuan, respectively, and the corresponding PE is 13/12/10 times, respectively, maintaining the “holding” rating. Risk warning: The profitability of the elevator business falls short of the expected risk, and the development of new business falls short of the expected risk.