Event: the company released a semi-annual report, the company completed sales revenue of 321 million yuan in the first half of 2012, an increase of 2.52% over the same period last year, and the net profit belonging to shareholders of listed companies was 41.17 million yuan, an increase of 6.97% over the same period last year.

Comments: 1) the company's performance growth in the first half of the year is relatively slow, and we believe that the overall economic environment is relatively depressed, resulting in downstream enterprises slowing down the pace of investment and weakening demand. The gross profit margin in the first half of the year was 28.72%, an increase of 3.52% over the same period last year. The main reason is that the company optimizes the production process to reduce costs, while the price of raw materials decreases. In the economic downturn, the company shows a relatively strong market position and sound business style.

2) Roots, which accounts for about 60% of revenue, still achieved a 10% growth rate, demonstrating the company's strong competitive position in this area. The second largest business mill is mainly used in the cement industry, which is greatly affected, with a negative growth of 29%, which is a drag on the performance in the first half of the year. The company's slurry pump benefits from the demand of mines and environmental protection, and the growth rate is relatively steady, reaching 30%. The business of pneumatic conveying is growing rapidly, and the import substitution effect is obvious, with a growth rate of 147.5%.

3) accounts receivable in the first half of the year totaled 115 million yuan, an increase of 15% over the beginning of the period. Inventory 158 million, down 17.7% from the beginning of the period, mainly due to a large decline in the inventory of self-made semi-finished goods and finished goods, indicating that the company is more timely to remove inventory and reduce the use of funds in times of economic downturn. The amount of accounts received in advance was 64.14 million yuan, down 23% from the beginning of the year, indicating that the order situation is not optimistic.

4) the rate of sales expenses was 8.7%, an increase of 2.1% over the same period last year, mainly due to the increase in business expenses and transportation costs. The rate of administrative expenses is 8.6%, an increase of 2% over the same period last year, which we think is mainly due to the increase in the salary level of personnel. Financial expenses due to the interest income generated by the funds raised has been reduced to minus 50,000 yuan.

Medium-and long-term view of the company: the company is the first domestic Roots fan brand, with a strong market position and pricing power. In the long run, the company benefits from the better demand of downstream chemical industry, water treatment and other industries. Energy-saving Roots fan and centrifugal blower fund-raising projects are expected to reach production in the next two years, achieving steady growth. The company's layout in the field of pneumatic conveying has achieved initial results, and there is a broad space for import substitution in the future, which is expected to form a new growth point.

Profit forecast and investment rating: we expect EPS to be 0.32 yuan 0.39 yuan and 0.48 yuan respectively from 2012 to 2014. Give 2012 20 times valuation, 6-month target price 6.4 yuan, give overweight rating.

Risk hint: the economic environment continues to deteriorate and there is a big decline in downstream investment