1H17 revenue +94.7%, net profit after deduction of net profit of 76.0%, net profit after deduction of net income +74.7% The company announced 1H17 results. Operating income increased 94.7% year on year to 12.49 billion yuan, gross profit increased 39.6% year on year, gross margin fell 1.7 percentage points year on year to 4.3%, net profit decreased 76.0% year on year to 100 million yuan, net profit after deducting net profit increased 74.7% year on year to 0.9 billion yuan. In the 2Q quarter, revenue was up 100.0% year on year, up 24.3% month on month, while net profit was down 62.1% year on year, up 129.9% month on month. Traditional bulk businesses have resumed, new sectors have grown rapidly, and operating income and profit growth have exceeded expectations, but due to a year-on-year decrease in deposit compensation payments, net profit for the current period fell short of expectations. Demolition compensation continues to affect year-on-year performance. The land exchange model will continue with the company's 1H16 land deposit and confirm non-recurring income of 450 million yuan, while 1H17 deposit compensation is reduced. The difference in non-recurring profit and loss caused the company's current profit to drop sharply year on year. In recent years, compensation revenue from the company's urban land deposit has become its main source of profit. In 2015/16, compensation payments reached 953/1,013 million yuan respectively. In 2017, according to currently known demolition projects, land compensation is expected to reach about 500 million yuan. Of these, the compensation for the Zhengzhou Logistics Center was not paid in the first half of the year according to previous agreements, so the probability of landing in the second half of the year is expected to be high. In the future, the corporate storage-subsidy model is likely to continue, and subsidy income is expected to remain at a high level. The operational business continues to improve, and the strategic transformation is beginning to bear fruit. The company's business structure is still being adjusted. The traditional commodity rebound is compounded by the volume of white goods logistics, driving performance growth, and the effects of the strategic transformation are gradually showing. Driven by a sharp rise in commodity volume and prices, the company's logistics trade revenue increased by 80.51% year on year, but the company will still maintain a cautious strategy for risky trade business. In the future, the company's vigorously developed lifestyle logistics, Internet+logistics and other businesses will gradually occupy a more important position. 1H17, the company's distribution and transportation business revenue increased 661.3% year on year. The increase in revenue was mainly due to the rapid development of the China Storage Intelligent Transportation Platform. The platform achieved revenue of 2.35 billion yuan in half a year and a transportation volume of 33.21 million tons. Logistics informatization transformation has begun to bear fruit. In the future, the company will continue its strategic transformation, vigorously expand the commodity supply chain business, and at the same time continue to cultivate the “logistics+Internet” characteristic business. The progress of the reform is slightly lower than expected, and the company needs to be promoted as the main operator in the logistics sector of Chengtong Group. It is a leading domestic warehousing and logistics enterprise, and has relatively high-quality assets and business networks. However, the degree of improvement in management efficiency and the progress of reforms have fallen short of expectations. In particular, the joint venture with Prologis has never seen any projects implemented, suppressing the company's valuation. As the country continues to step up the reform of central enterprises, there is a possibility of operational cooperation with the newly integrated Huamao Logistics in the future, which is expected to strengthen the company's market-based operation level and improve the company's asset quality and profitability. Management improvements are difficult to overcome the uncertainty of deposit compensation. Valuation reforms need to be catalyzed to maintain the “increased holdings” market, and the valuation given to deposit compensation in the “accumulation” market is low. Therefore, although fluctuations in compensation payments have a large impact on performance, they have little impact on the company's market value, so more attention needs to be paid to improving operating performance and the progress of reforms. In the second half of the year, under the premise of a stable macroeconomic environment, there was a high degree of certainty about the recovery of the company's operating performance, while previous expectations for reforms were lower as a result. If there were signs of breaking the ice, there was a significant increase in valuation. Based on the precautionary principle, compensation expectations were lowered. The company's profit forecast for 2017-19 was adjusted to 6.52/701/810 million yuan (previous value: 840/9.33/960 million yuan), but the “increase in holdings” rating and current target price were maintained. Risk warning: Steel prices have fallen sharply, and the benefits of the land demolition and compensation model have been drastically reduced.