Incidents: Recently, the company announced its 2016 semi-annual report; in the first half of the year, the company achieved operating income of about 149 million yuan, a year-on-year decrease of 37.6%; net profit of about 15.31 million yuan, a year-on-year decrease of 72.2%; and EPS of about 0.05 yuan/share. Among them, the company achieved operating income of about 59.45 million yuan in the second quarter, a year-on-year decrease of 50.5%; net profit of net income was about 4.54 million yuan, a year-on-year decrease of 84.6%. Comment: Some contracts have a long carry-over cycle, new products are still in the early stages of promotion, and revenue growth slowed in the first half of the year. 1) Since the peak of desulfurization and denitrification in thermal power plants has passed, a new round of large-scale replacement cycles has not yet started, and the new product low-temperature economizer is still in the initial promotion stage. In the first half of the year, revenue from industrial protective enamel materials was about 84.36 million yuan, a year-on-year decrease of 46.9%, of which revenue from low-temperature economizers was about 68.18 million yuan. 2) The large order carry-over period for some large orders in the interior facade decoration enamel materials business has a long carry-over period. Revenue in the first half of the year was about 62.87 million yuan, down 10.5% from the previous year. 3) Since there is no dedicated production line for enamel board green building curtain wall materials (2 special production lines will be put into operation before September 30), the company gave priority to serving the high-margin subway business. In the first half of the year, enamel board revenue was about 290,000 yuan, a sharp drop of 96.3% over the previous year. Industrial protective enamel materials are in the new product promotion stage, dragging down the overall gross profit margin. Due to the limited revenue scale of old products, the new low-temperature economizer is in the early stages of promotion. The gross margin of industrial protective enamel materials in the first half of the year was about 17.2%, down 24.3 percentage points from the previous year, of which the gross margin of low-temperature economizers was about 11.2%. The gross margin of the interior decoration materials business in the first half of the year was about 50.1%, an increase of 9.5 percentage points over the previous year. The company's consolidated gross margin for the first half of the year was about 31.4%, down 10.6 percentage points from the previous year. Ongoing orders can be expected to support subsequent revenue improvements. At present, the company has disclosed that the total amount of major order contracts in hand is about 220 million yuan. The vast majority of these are in the delivery stage, and revenue has not yet been carried forward. Revenue is expected to gradually improve as orders are executed one after another. “Big environmental protection” is the main line of the company's medium- to long-term strategy, and the gradual implementation of environmental protection extensions can be expected. Since October 2015, the company has successively acquired Tianrun New Energy (MGGH business development), participated in Feiran Energy (energy efficiency system), China Great Wall Energy (energy efficiency management consulting), and open source new energy (carbon trading, carbon finance), and is involved in sewage treatment and environmental protection business, with strong environmental protection execution. In the future, the company will continue to seek new growth and main business collaboration in the field of energy saving and emission reduction. Maintain a “buy” rating. The company has introduced an employee stock ownership plan in the early stages. As of the end of June, the average transaction price is 19.35 yuan/share. If the net value of the enterprising share at the time of liquidation is lower than the capital raised, the company's actual controller will make up for it, demonstrating the company's confidence. We expect the company's 2016-2018 EPS to be about 0.50, 0.59, and 0.70 yuan respectively. We gave the company 55 times PE in 2016, with a target price of 27.50 yuan. Risk warning. The development of new application fields did not meet expectations, and transformation and upgrading fell short of expectations.