The performance of renewable resources and equipment increased significantly, maintaining the "buy" rating Huahong Technology 2021H1 achieved operating income of 3.157 billion yuan, an increase of 164.82% over the same period last year, of which the revenue of the resource recovery business reached 2.756 billion yuan, an increase of 224.99% over the same period last year, and a gross profit margin of 15.05%, an increase of 3.58 pct over 2020H1. The net profit of returning to the mother was 257 million yuan, an increase of 240.65% over the same period last year, which was in the middle of the performance forecast range.

We keep our earnings forecast unchanged. We expect the company's net profit to be 5.47pm 6.90 / 874 million yuan in 2021-2023 and 1.50 yuan EPS in 2021-2023. The current share price corresponds to a price-to-earnings ratio of 21.1pm 16.8shock 13.2 times, maintaining a "buy" rating.

Taking advantage of the energy transformation, scrap equipment and recycling performance increased significantly. The company's scrap processing equipment business 2021H1 realized operating income of 680 million yuan, an increase of 93.88% over the same period last year, with a gross profit margin of 16.37%, an increase of 2.14pct compared with 2020H1, mainly due to the improvement of the company's cost management and control ability. The scrap and scrap automobile business achieved an operating income of 748 million yuan, an increase of 334.19% over the same period last year, and a gross profit margin of 1.38%, a slight decrease in 0.64pct compared with 2020H1. The total consumption of scrap steel in 2021H1 is 137.95 million tons, an increase of 44.2 million tons, or 47.1 percent, compared with 2020H1. The demand for scrap steel and scrap equipment continues to improve. Under the background of "carbon neutralization", the transformation and upgrading of the domestic iron and steel industry has been accelerated, and the orders of scrap processing equipment and recycling business have increased rapidly. At the end of the first half of 2021, the company's contract debt was 211 million yuan, an increase of 170.87% over the beginning of 2021, proving that the company is rich in orders-on-hand and has strong certainty in its future performance.

Benefiting from the rise in rare earth prices, the volume and price of rare earth recycling business has risen.

The company's 2021H1 rare earth recycling business achieved operating income of 1.328 billion yuan, an increase of 308.62% over the same period last year, with a gross profit margin of 22.07%, an increase of 8.57pct over 2020H1, mainly due to the increase in the price of 2021H1 rare earth oxides and the improvement of the company's rare earth recovery capacity. The company 2021H1 completed the acquisition of Jiangxi Wanhong, further improving the recovery capacity of rare earths. Benefiting from the strong demand for new energy vehicles and wind power, the price of 2021H1 rare earth oxides is higher than that in 2020, and the company's rare earth recycling business is promising in the future. The company's 2021H1 R & D expenditure was 104 million yuan, an increase of 159.82% over the same period last year, mainly because the company increased the research and development of new products and new technologies, and the renewable resources business is expected to make further breakthroughs in

Risk hint: market competition intensifies, raw material prices rise, and the benefits of M & An integration are lower than expected.