Event: On August 17, the company released its 2017 semi-annual report. 17H1 achieved total operating income of 1,326 billion yuan, an increase of 12.99% over the previous year; the net profit of the mother was 58.678 million yuan, an increase of 2.01% over the previous year, in line with the performance forecast of the change in net profit of -15% to 15%. The company expects net profit from January to September to be 6983-116.38 million yuan, with a year-on-year change range of -25% to 25%. The lead-acid battery business is growing steadily, and the release of smart battery solutions directly hits data center pain points: the company currently sells mainly lead-acid batteries, mainly used in UPS power, communications, energy storage and other fields. The 17H1 lead-acid battery business had revenue of 1,176 billion yuan, an increase of 17.54% over the previous year, and a gross profit margin of 14.13%, a decrease of 1.28 pct. Among them, UPS power achieved revenue of 742 million yuan (+12.48%); communication battery revenue of 130 million yuan (+15.66%); energy storage battery revenue of 135 million yuan (+57.54%); and the decline in battery gross margin was mainly due to the company's efforts to develop and occupy the domestic communications, energy storage and data center markets, give appropriate concessions to strategic customers, and the continuous increase in labor and raw material costs. On August 16, the company released the self-developed “Enercloud Smart Battery Solution” for intelligent power management in computer rooms. Enercloud's smart battery solution can reduce installation and debugging time by 50%. There is no need to add a battery monitoring module, no need to use a handheld encoder to assign battery addresses one by one, and it can also reduce the battery monitoring and installation accident rate by 90%. Enercloud's embedded battery management system will effectively enhance the soft power of the company's products and contribute to the steady growth of lead-acid battery performance. The growth of the lithium battery business slightly exceeded expectations, and the high-energy density ternary battery completed the pilot test: the company's lithium battery business achieved revenue of 110 million yuan, a year-on-year increase of 102.65%, and a gross profit margin of 21.02%, an increase of 15.08pct over the same period last year. The sharp increase in the lithium battery business is due to the large number of orders received in the telecommunications sector, and the company's lithium batteries are in a leading position in the UPS market. The company's 1 billion watt-hour lithium battery project has invested 53.87 million yuan as of 17H1, and construction is expected to be completed in 2018 Q3. The company has completed the development of a high-efficiency and safe composite ternary ceramic power lithium battery NCM523, and has developed a single aluminum shell battery with an energy density of 42 Ah and an energy density of at least 200 Wh/kg. The pilot evaluation of the sample has passed, and it is expected to be put into mass production within 2017. The fuel cell business continues to advance, and hybrid prototype design and assembly have been completed: the company currently holds 21.74% of the shares in Beijing Hydrogen Pu. In the first half of the year, Beijing Hydrogen Pu signed a 120 million yuan fuel cell contract with Cathay Pacific Blue Sky for 500 sets of 30KW vehicle fuel cell stacks, and fuel cell commercialization continues to advance. Xiongtao has now completed the installation and commissioning of a fuel cell UPS at a communication base station in India; in terms of power fuel cells, it has completed the design and assembly of the fuel cell hybrid prototype. It is already in the stage of technical program verification, prototyping, and reliability testing of the prototype vehicle. Subsequent companies are expected to connect hydrogen from scrap aluminum with kilowatt fuel cell system technology. Investment suggestions: Based on the company's steadily growing main business and rapidly growing lithium battery business, we expect the company's 2017-2019 EPS to be 0.38 yuan, 0.47 yuan, and 0.57 yuan respectively, corresponding PE to be 43.5, 35.6, and 29.2 times, respectively, to continue to be given the “increased holdings - A” rating, and the target price for 6 months will be adjusted to 19.00 yuan. Risk warning: the risk of raw material price fluctuations, lead-acid battery competition intensifies, and the development of new energy business falls short of expectations