Incident: On July 11, the company released a revised forecast for the 2017 semi-annual results. The company expects to achieve net profit of 4835.92-54.4041 million yuan in 2017 H1, an increase of 60%-80% over the same period last year. China's leading panel furniture machinery company, pioneering the new circuit of customized furniture for card slots. The company focuses on the field of panel furniture machinery. In recent years, benefiting from consumption upgrades and the space utilization requirements of small and medium-sized housing, custom furniture is rapidly rising in China. The company raised its estimated net profit for 2017 H1 this time, mainly because the company is responding to the new demand of furniture companies for flexible production of custom-made furniture for the whole house. The sales volume of the fully automated furniture production line produced by the company exceeded the company's expectations. The trend of custom-made furniture is driving manufacturers to purchase or upgrade equipment in large quantities. The company currently has plenty of orders, and is expected to continue to grow at a relatively rapid pace throughout the year. The trend of custom furniture is on the rise, and automated production equipment will become a competitive field in the future. According to the Zhiyan Consulting Report, the current penetration rate of domestic custom furniture is around 20%, far below the level of more than 70% in Europe and the US. There is huge room for growth in the long run. According to the performance estimates of custom furniture companies such as Sophia and Hollyke, the current revenue growth rate of domestic custom furniture companies is over 30%, which is significantly higher than the overall growth rate of the furniture industry. It is estimated that in the next 5 years, the CAGR of domestic custom furniture will reach more than 18%, and the market size will reach 16.6 billion yuan by 2020. Under the custom furniture model, numerical control equipment and flexible production lines have become the key to balancing the contradiction between individual furniture needs and large-scale production. The expansion of the custom furniture market will surely release a large demand for equipment upgrades. The company's technological advantages are obvious, and the processing center is expected to become a new growth engine. Nanxing Equipment has industry-leading R&D capabilities. The company has 116 R&D personnel, accounting for 11.68% of all employees. The company invested 18.39 million yuan in R&D in 2016, accounting for 3.66% of revenue. The flexible production unit and high-end CNC equipment of the processing center independently developed by the company are fully suitable for flexible production of customized furniture. The company can provide furniture manufacturers with overall customized furniture solutions, support other manufacturers' equipment to optimize equipment connections and production layout, and cooperate with the order unpacking system to unpack orders, schedule production, etc., to achieve automated and intelligent production. In 2016, the flexible production unit of the company's processing center achieved revenue of 112 million yuan, a year-on-year increase of 182.46%. The share of processing centers in total revenue rose to 22%. Driven by the trend of custom furniture, intelligent equipment such as processing centers is expected to become a new growth engine. Furthermore, the company previously announced that it plans to acquire an integrated Internet service operator. Currently, the asset acquisition is in the negotiation stage. The company's move is aimed at further improving the company's informatization service level and better adapting to the flexible production of customized furniture. We believe that the target of the company's proposed acquisition forms good coordination with the company's business. After successfully completing the acquisition, the company will further expand its advantages in providing overall customized furniture solutions. Investment advice: The company's 2017 H1 performance exceeded market expectations, and custom furniture dividends were released ahead of schedule. We expect the company's revenue in 2017-2019 to be 644 million yuan, 865 million yuan and 1,193 million yuan respectively, with growth rates of 28.1%, 34.3%, and 38.0% respectively, and net profit growth rates of 45.6%, 38.9%, and 41.4% respectively, with outstanding growth; continuing to give buy-A investment rating, with a target price of 51.00 yuan for 6 months. Risk warning: The popularity of custom furniture falls short of expectations, and market competition is intensifying.