The incident company announced its semi-annual report. In the first half of 2012, the company achieved operating income of 662 million yuan, an increase of 6.00% over the previous year, net profit attributable to listed companies of 496.567 million yuan, an increase of 6.90% over the previous year; and achieved basic earnings per share of 0.21 yuan, an increase of 5.00% over the previous year. Key investment performance was in line with expectations, with gross margin and period expense ratio both falling month-on-month. Revenue in the first quarter was low due to the influence of the early Spring Festival. Revenue in the second quarter increased 29.95% month-on-month, but due to the decline in gross margin, net profit only increased 14.73% month-on-month. After the issuance of convertible bonds was completed, the company's financial expense ratio fell sharply to 2.26% from 3.62% in the first quarter, the sales expense ratio in the second quarter continued to drop to 5.2%, and the period expense ratio fell to 12.8% from 17.3% in the first quarter. However, price competition for public tenders is becoming increasingly fierce, and the company's gross margin still fell from 28.3% to 22.78%, causing net profit growth in the second quarter to fall short of revenue growth. The share of cigarette paper has declined, and Yunnan Tobacco has become the biggest customer. Compared to the second half of last year and the first half of 2012, the gross margin of cigarette paper was stable at 38.03% among all products, but the share of revenue and profit declined. The gross profit margin of filter paper was 24.77%, and the share of revenue increased by 1.4 percentage points. In the second half of the year, with the gradual production of Bible paper and the construction of 6,000 tons of high-permeability molded paper, the share of cigarette paper will continue to decline. By region, revenue in the northern region increased by 28.64% year on year, and revenue in the southern region decreased by 18.17%. Yunnan Tobacco became the company's largest customer, and Guangdong China Tobacco's revenue fell to 5.05%. Revenue growth in the second half of the year depended on high-permeability molded paper and Bible paper. With the completion of the 17,000-ton Bible paper project in June and the consolidation of 150 million on-going projects, it is expected that the second half of the year will gradually contribute to performance. Revenue growth in the second half of the year mainly depends on the sales situation of high-permeability molded paper and the absorption of new Bible paper production capacity. Revenue growth in the second half of the year is expected to be faster than in the first half of the year. At the same time, as sales of high-margin high-permeability molded paper increase, gross margin is also expected to improve, maintaining the profit growth forecast of 11.7% in 2012. Maintain the company's holdings increase rating. We maintain the company's earnings forecast of 0.43 yuan per share for 2012, with reference to the company's historical average valuation level, and taking into account the growth brought to the company by large-scale expansion of production capacity, we gave the company a price-earnings ratio of 18 times, corresponding to the target price of 7.74 yuan, and maintained the company's holdings growth rating. Risk factors: Overcapacity in the cigarette paper industry, price competition gradually became fierce after public bidding in the industry, and there is a high risk that the gross margin of homogenized products such as cigarette paper will decrease; in the early stages of new production capacity, product sales prospects are uncertain