The first-half results are in line with expectations: the company achieved a net profit of 194 million yuan in the first half of the year, an increase of 14.21% over the same period last year, and basic earnings per share of 0.52 yuan, which is basically in line with our expectations. The increase in revenue is mainly due to the hot market demand and the increase in production capacity in previous years; the gross profit margin of industrial steam turbines in the first half of the year rose 1.36 percentage points over the same period last year, and the profit growth was mainly due to production growth.

The company's industrial steam turbine revenue and gross profit margin increased slightly: the industrial steam turbine business is the company's main business, with revenue of 1.211 billion yuan in the first half of the year, an increase of 9.39% over the same period last year, accounting for 92.75% of the company's total revenue. The increase in revenue is mainly due to the strong demand for power generation equipment in the past few years, the company's orders have not been fully digested, and now the company's production capacity has increased. In the first half of the year, the company completed a total of 225 steam turbines / 2482202 kilowatts, an increase of 16.60% and 27.40% respectively over the same period last year. The gross profit margin of the business in the first half of the year was 39.59%, up 1.36% from the same period last year. It should be said that the company can maintain the rising trend of gross profit margin in the current situation of rising PPI and soaring steel prices, reflecting the company's strong ability to control costs.

Thermal power growth shows signs of peaking, and the company's growth may be difficult to maintain: since 2007, national thermal coal prices have risen by nearly 80 yuan per ton, greatly increasing the cost of thermal power. Although the national sales price has increased in July this year, it is still unable to digest the rising pressure of thermal coal, resulting in a decline in the profits of thermal power enterprises, and the desire to buy new power generation equipment is far less strong than in previous years. If this situation continues, it will be difficult for the company to maintain its revenue growth.

The price of upstream products continues to rise, and the downside risk of the company's gross margin increases: ferrous metal prices have risen rapidly so far this year, and the international steel price index has risen 66.5% so far this year. The growth of downstream raw materials will eventually greatly increase the cost pressure on the company.

In the case of the decline in the downstream economy, the cost of the company's accounts receivable began to show: the balance of the company's accounts receivable was 1.098 billion yuan at the end of June, an increase of more than 100 percent from the beginning of this year. With the continued implementation of the country's tight monetary policy, it is expected that the difficulty of loan recovery will continue to increase. This will bring greater uncertainty to the company's profits. L Investment advice: generally speaking, the business cycle of the company's sub-industry shows obvious signs of peaking. Under the condition of increasing PPI, the company is under pressure from both upstream and downstream, so investors are reminded to pay attention to the risk. The company is expected to earn 0.8 yuan per share in 2008, corresponding to a price-to-earnings ratio of 9 times 2008, which is lower than the median of the industry. Give a "neutral" rating.