1H22 performance is in line with our expectations

The company announced 1H22 results: the income was 430 million yuan, an increase of 29.9% over the same period last year, and the net profit was 54.64 million yuan, a decrease of 16.5% over the same period last year. 2Q22 realized income of 200 million yuan, an increase of 12.2%, and a net profit of 22.09 million yuan, a decrease of 38.5% over the same period last year. Due to the slowdown in income growth, the performance was lower than we expected.

2Q22's gross profit margin increased by 0.9ppt to 48.1% year-on-year, compared with 1Q22 significantly increased 10.6ppt, we think it is mainly due to the lower price of raw materials; the total rate of the four periods increased by 6.6ppt to 27.0% compared with the same period last year, in which the sales / R & D / financial expense rate increased respectively compared with the same period last year; the increase in financial expense rate was mainly due to the increase in interest expenses caused by new financing. 1H22's parent net interest rate fell by 9.0ppt to 10.9% compared with the same period last year.

The net operating cash inflow of 1H22 was 41.08 million yuan, which was better than the net outflow of 98.23 million yuan in the same period last year, mainly due to the increase in VAT deduction tax rebate; the net cash outflow from investment was 97.78 million yuan, narrowing from 320 million yuan in the same period last year.

Trend of development

The contribution income of Changzhou Green has increased rapidly, and the income is expected to maintain steady growth in the second half of the year. 1H22's revenue increased by 29.9% over the same period last year, of which we estimate that about 40 million yuan was added by Changzhou Green and contributed by Changzhou Green. Excluding the implied income of the same caliber, the growth rate is about 18%, which is stable compared with 2021. Looking forward to the second half of the year, local finance and real estate developers' funds may be tight or restrict the landing, promotion and payment speed of downstream projects, but considering that the market demand is expected to continue to grow under the support of the shock isolation policy, and the company has strong newly signed orders and sufficient existing orders, we expect that the company's revenue will continue to grow steadily and rapidly in the second half of the year.

Gross profit margin is expected to rise in the second half of the year compared with the same period last year. The gross profit margin of 4Q21-2Q22 reached 33.2%, 37.5% and 48.1% respectively, increasing quarter by quarter. Looking forward to the second half of the year, considering that the average steel price is expected to remain low compared with the same period last year, the company's gross profit margin is expected to remain high; superimposed on the lower base gross margin in the second half of 2021, we believe that the company's gross profit margin is expected to continue to improve in the second half of the year compared with the same period last year.

Profit forecast and valuation

Due to the lower-than-expected progress of the project due to the shortage of downstream owners' funds, we have lowered the net profit forecast for 2022 and 2023 by 33% and 34% to 240 million yuan and 440 million yuan. The current share price corresponds to a price-to-earnings ratio of 32.6 times 2023. Maintain the outperform industry rating, while taking into account the rebound in market risk appetite, maintain the list price of 72.40 yuan, corresponding to 39.8 times 2023 price-to-earnings ratio, 22% upside compared with the current stock price.

Risk.

The progress of the project landing is not as expected.