Summary of the report:

Event: the company released today's report that the company achieved operating income of 331 million yuan in the first half of the year, an increase of 6.41% over the same period last year, and a net profit of 88 million yuan, an increase of 13.68% over the same period last year. From the perspective of a single quarter, the net profit in the first quarter was 37 million yuan, an increase of 15.80 percent over the same period last year, and that in the second quarter was 51 million yuan, an increase of 12.21 percent over the same period last year.

Comments:

The company's performance continues to grow steadily and its profitability is strong. The company's two major businesses are intelligent packaging equipment and plastic packaging products. The company's main products are intelligent packaging equipment, with sales revenue of 247 million yuan in the first half of the year, an increase of 5.24% over the same period last year, and sales revenue of 49 million yuan in the first half of the year, an increase of 3.84% over the same period last year. Among them, the sales revenue of the dairy industry reached 292 million yuan, an increase of 0.07% over the same period last year. The company's comprehensive gross profit margin in the first half of the year was 44.6%, down 2.46 percentage points from the same period last year, and the level of three fees remained stable. The company's net return rate was 26.44%, an increase of 1.69 percentage points over the same period last year, showing strong profitability.

The company's inventory is growing rapidly to ensure the performance in the second half of the year. The company's equipment products are customized products, generally adopt the production mode of fixed production on the basis of sales, and the production cycle is between 3-6 months. According to the China Daily, inventory in the first half of 2017 was 551 million yuan, an increase of 20.88% over the same period last year. The sharp increase in inventory shows that the company has sufficient orders, which will effectively guarantee the company's performance in the second half of the year.

Continue to be optimistic about the company's future development prospects. From the perspective of market space, the income of the company's dairy industry accounts for 80%, and the volume of China's dairy industry still has a lot of room for improvement compared with developed countries, and other markets other than dairy products are also constantly expanding. coupled with the rapid expansion of the market space of intelligent packaging equipment and the opening of markets in countries around Belt and Road Initiative, have provided a good market environment for the company. After years of development, the company's innovation capability and technological advantages have reached the international leading level, good market prospects and leading technological level, laying a solid foundation for the company's sustainable development in the future.

Investment advice and rating: the company's 2017-2019 homing net profit is expected to be 186 million, 201 million and 216 million, with a "overweight" rating of 29, 27 and 25 times PE.

Risk tips: downstream liquid food industry is not as expected; risk of loss of major customers