According to the company's semi-annual report for 2021, 2021H1 achieved an operating income of 130 million yuan, an increase of 44.35% over the same period last year, a net profit of 18.61 million yuan, an increase of 39.86% over the same period last year, and a deduction of 15.99 million yuan for non-net profit, an increase of 120.08% over the same period last year.

High base orders Q2 performance pressure, sufficient orders to ensure performance growth. According to the company's semi-annual report for 2021, 2021H1 achieved an operating income of 130 million yuan, an increase of 44.35% over the same period last year, a net profit of 18.61 million yuan, an increase of 39.86% over the same period last year, and a deduction of 15.99 million yuan for non-net profit, an increase of 120.08% over the same period last year. Of this total, Q2 realized revenue of 90.51 million, an increase of 12.82% over the same period last year, a net profit of 12.72 million, a decrease of 37.08% over the same period last year, and a deduction of 10.31 million yuan for non-net profit, a decrease of 40.27% over the same period last year. The decline in Q2 performance is mainly due to the fact that under the influence of the epidemic last year, on-site acceptance work could not be carried out in the first quarter, and revenue recognition was concentrated in the second quarter, resulting in a high 2020Q2 base. The pace of company acceptance affects performance, and orders can better reflect the demand of the industry. from the point of view of orders, by the end of June 2021, the number of orders on hand was 302 million, an increase of 93.59% compared with 156 million in the same period last year. Sufficient orders provide a guarantee for the growth of the company's performance.

Gross profit margin remains high and cash flow is under short-term pressure. Against the background of rising commodity prices in the first half of the year, the company's basic raw material prices continued to rise, but still achieved a gross profit margin of 58.3%, only a decline in 0.92pct compared with the same period last year, mainly due to the company's efforts to improve the level of supply chain management by improving production and efficiency through technological solutions and process optimization. From the expense point of view, the company's expense rate decreased in the first half of the year. The sales expense rate, management expense rate, financial expense rate and R & D expense rate were 20.73%, 15.63%,-0.96% and 13.62%, respectively, compared with the same period last year.-0.19pct,-0.32pct,-3.00pct,-1.71pct, of which the financial expenses decreased significantly, mainly due to the decrease in borrowing and the increase in deposits of funds raised by IPO. The company's cash flow is under short-term pressure, with a net operating cash flow of 10.84 million in the first half of the year, a decrease of 29.86% compared with the same period last year. We judge that it is mainly due to the accelerated pace of upstream payment due to the shortage of upstream raw materials.

Industry analysis: a growth track driven by endogenous demand and policy. The main results are as follows: 1) Endogenous demand: medical materials in hospitals rely on high-intensity manual processing for a long time, which is inefficient and prone to manual errors, so there is a strong endogenous demand for intelligent management of medical materials. 2) Policy guidance: documents to encourage and guide the intelligent management of medical materials have been issued one after another to provide a good policy soil. On February 25, 2021, Anhui Province issued the "Guide to the Construction of Intelligent Pharmacy", which established the goal of the construction of intelligent pharmacy and stipulated the requirements of business informatization, equipment automation, intelligent environment and security system for the construction of intelligent pharmacy, which further enhanced the standardization of the industry. 3) the potential demand space is sufficient: the long-term growth of medical and health investment in China and the provinces speed up the construction of the deficiency board after the epidemic, so as to provide potential demand space for the intelligent management of medical materials. At the end of 2018, the overall penetration rate of automation equipment in outpatient pharmacies in China was about 20.0%. We judge that the overall penetration rate of intelligent management of materials in China's medical industry is currently less than 10%, and there is much room for improvement in the future.

Comprehensive strength, technology and talents to build a moat. The company has a strong comprehensive strength and a leading market position. by the end of 2018, the market share in the field of outpatient pharmacy automation is 28.5%, second only to Jianxin information, and the brand effect has gathered many new customers for customers. the perfect after-sales service network enhances the company's customer stickiness and ensures that the company excavates more value in a single customer, which is good for long-term development. The intelligent management industry of medical materials has the characteristics of talent-intensive and technology-intensive, and the company relies on the industry's leading technical level and talent advantages to build a moat. Since its establishment, the company has always paid attention to R & D investment, with R & D expenditure of 32.24 million yuan in 2020, R & D expenditure rate reaching 10.40%, and R & D personnel accounting for 21% of the total number of employees. Relying on the perfect training system and competitive salary in the market, the company has trained a group of experienced technical and business personnel. Mr. Jiao Xiaobin, the core technical staff, once worked in Beijing Beida Fangzheng Electronics Co., Ltd. has many years of research and product development experience in computer vision and other fields.

Rapid response to market demand, customized service capacity is scarce. The intelligent management industry of medical materials as a new business format, enterprises in the industry have the characteristics of basic and forward-looking industry understanding, demand mining, product innovation and other characteristics is an important way to obtain core competitiveness, the company can have a keen insight into market demand, respond in a timely manner, and quickly transform customer needs into new products. In addition, the company has the ability to undertake the scarce service of integrated intelligent allocation library, and won the bid for Nantong Medical Center project (under implementation) in 2020, with a project amount of 49.59 million yuan; in the first half of this year, it won the bid "Integrated Intelligent Storage and Distribution system of Kunshan Western Medical Center" and "Purchasing and installation of automatic Pharmacy Storage and Distribution Library of Eastern Medical Center", with the project amount of 48.87 million yuan and 43.79 million yuan respectively.

Profit forecast and investment advice: we expect the operating income of Elon Technology from 2021 to 2023 to be 408 million, 545 million and 726 million respectively, the return net profit to be 94 million, 122 million and 162 million respectively, and the basic earnings per share to be 1.22,1.58 and 2.10 yuan respectively, and the corresponding PE is 43.7X, 33.6X and 25.4X respectively. The medical materials intelligent management system industry is in the growth stage, the market saturation is low, and it is a blue sea track with full potential. Elon Technology, as an industry leader, has a rich product line, a leading market position, and a scarce customized service capacity in the industry. maintain the buy rating.

Risk tips: product and technological innovation research and development risk, industry competition risk, brain drain risk, market space measurement deviation risk, the use of public information lag or not updated in a timely manner.