1. Event

Jin Zitian is releasing a semi-annual report for 2008. In the first half of 2008, the company achieved a main income of 312 million yuan, and the net profit of shareholders belonging to the parent company was 21.26 million yuan, an increase of 43.81% and 42.96% respectively over the same period last year.

2. Our analysis and judgment

The company's performance is in line with our expectations, and the new income tax rules reduce earnings per share by 0.04 yuan.

The company's earnings per share of 0.21 in the medium term are basically in line with our expectations. Judging from the interim financial statements, the company's actual performance should be higher than this number: the company's comprehensive income tax rate in 2007 is 9.47%. As the new income tax relief policy has not yet been approved, the company temporarily calculates the first half income tax at 25%, reducing the interim performance by 0.04 yuan. however, the company is in line with the high-tech enterprise policy, and it is estimated that the enterprise income tax will be levied at most at 15% for the whole year.

The company's operating efficiency has been further improved.

Due to the increase of new construction and technical transformation projects in the iron and steel industry, the company has entered the harvest period after years of hard work in the industry, and the company's revenue and orders continue to grow. At the end of this period, the company's inventory reached 689 million yuan and accounts received in advance reached 872 million yuan, all of which reached an all-time high, indicating that the company's orders are still full and increasing.

Due to the growth of the company's revenue and the appearance of the scale effect, the company's comprehensive gross profit margin continues to improve. The company's gross profit margin has continued to rise in recent years since it hit an all-time low of 13.12% in 2005, reaching 19.32% in the first half of this year. In addition, the revenue of the company's industrial special testing and control instruments and power semiconductor components with high gross margin has increased significantly, thus accounting for an increase in total income, which has also promoted the improvement of the company's gross profit margin.

The company's business is too concentrated in the steel industry.

According to the interim report, 96% of the company's revenue comes from the steel industry, and its business is too concentrated. At one time, the company tried to expand into other industries, but the progress was not significant. On the one hand, the iron and steel industry could not cope with its own orders, on the other hand, there were no small barriers to entry into other industries, which required a process.

In the next two years, the company will enter the performance release period.

In recent years, the company has full orders, but restricted by the lack of production capacity, in 2007, the company started the construction of the Zhuozhou base, which is expected to be completed in 2008. With the new base put into use, the company's performance will enter the release period in the next two years. Rapid growth can be expected.

3. Investment advice

We maintain the company's earnings forecast for the next three years, and expect the company's earnings per share from 2008 to 10 to be 0.53, 0.76 and 0.97 yuan respectively; the company's current stock price is low, with a price-to-earnings ratio of only 11 times 2009 results, and we maintain the company's "recommended" investment rating.