Key investment points: In the first half of the year, the company achieved operating income of 375 million yuan, a year-on-year increase of 25.72%, net profit attributable to shareholders of the parent company of 38.992 million yuan, a year-on-year decrease of 14.24%, and earnings per share of 0.11 yuan, lower than expected. The company's revenue confirmation fell short of expectations, mainly because the overall progress of delivery and acceptance of the south-to-north water transfer project was slow, and the upfront costs of setting up subsidiaries to execute orders and obtain orders were high, so sales expenses and management expenses increased by 40.05% and 27.8% year on year. There was a decrease in net profit. The increase in the cost ratio reduced net interest rate to 10.18%, down 4 percentage points from the previous year. The number of new orders signed in the first half of the year increased rapidly, and there were plenty of orders in hand. The major project orders announced by the company in the first half of the year were mainly from the Hebei South-to-North Water Transfer Project and the Ningxia Energy and Chemical Plant, totaling 290 million yuan. However, the number of small and medium orders that won bids for less than 100 million yuan increased rapidly. In the first half of the year, 928 million new orders were signed (including large orders), the order contract amount being executed was 1.37 billion yuan, the contract delivery amount was 533 million yuan, and the contract value of the orders that have not yet been executed was 533 million yuan. The company leverages the advantages of a rich variety of businesses. While the growth rate of concrete pipes is lower than expected, plastic pipes have maintained high growth. Compared with other single listed companies in the pipe category, the company has a wide range of businesses, including concrete pipes, plastic pipes, etc., which means that the range of demand is wide and the resistance to volatility is strong. In the first half of the year, the company's revenue from concrete pipes and plastic pipes was 230 million yuan and 144 million yuan respectively, with growth rates of 19% and 39.13%. To a certain extent, the growth in the plastic pipe business can make up for the decline in revenue caused by slow confirmation of orders for concrete pipes. The second half of the year is expected to usher in a peak period of order confirmation and an increase in net interest rates. In the first half of the year, concrete pipes only confirmed revenue of 230 million yuan. In the second half of the year, it is expected that as the south-to-north water transfer project progresses, it will enter a peak period of order confirmation. At the same time, there will be more upfront costs. In the second half of the year, there will be less cost pressure, and the net interest rate level will rise. In its semi-annual report, the company gave a performance forecast for the first three quarters. Net profit attributable to shareholders of the parent company in January-September was 667.05-89.060,600, with a year-on-year growth rate of -10%-20%, and the decline will narrow. The progress of water conservancy projects is affected by various factors such as capital, financial strength, and the government's willingness to promote it. It is difficult to predict progress, especially for major water conservancy projects, but forecasting is only a matter of time. In the future, the company is expected to continue to receive an increase in orders, such as the Shandong South-to-North Water Transfer Support Project, the Shanxi Water Network Project, the Shaanxi Hanjiwei Diversion Project, and the Gansu Taoist Water Supply Project. Profit forecasts and investment advice. We expect the company to have an EPS of 0.35\ 0.55\ 0.65 in 2013-2015, with sufficient orders in hand. Along with project settlement, the second half of the year will enter the order confirmation concentration period. Based on the current stock price 8.3, 23 times that of 2013 PE, the “buy” rating will remain unchanged. Risk warning: Project progress and settlement progress are below expectations.