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According to the semi-annual report released by the company, the operating income of the company in the first half of the year was 277 million yuan, down 20.88% from the same period last year, and the net profit belonging to shareholders of listed companies was 98.9 million yuan, up 292.99% from the same period last year.

Peace viewpoint:

After receiving the compensation for demolition, the net profit increased significantly: the company's net profit in the first half of the year was 98.9 million yuan, an increase of 292.99% over the same period last year; the net profit after deducting non-return was-39.26 million yuan, down-276.86% from the same period last year. The company's non-recurrent profit and loss during the reporting period was 163 million, mainly from demolition compensation. From the perspective of the company's main business, two main businesses are under pressure in the short term: (1) the ventilation business of the parent company is mainly affected by the approval progress of downstream nuclear power projects, and the operating profit in the first half of the year is-35.76 million yuan; (2) the energy pipe business of ZTE equipment, a wholly-owned subsidiary, is affected by factors such as raw material prices and downstream prosperity, and its income and gross profit margin have declined, with a net profit of 1.58 million yuan.

Nuclear power project approval is expected to restart at the end of the year, and the company is expected to benefit significantly: nuclear power is an important downstream industry of the company's ventilation business, and the bidding progress of nuclear power projects has a great impact on the company's performance. From 2016 to now, affected by the progress of the AP1000 demonstration project and other factors, the number of domestic nuclear power projects approved is 0, which is one of the most important reasons for the pressure on the company's performance. In August 2017, CNNC announced that Sanmen No.1, the world's first AP1000 nuclear power unit, is about to start loading, and after charging, the units will be connected to the grid. We believe that after Sanmen No.1 is connected to the grid, China's nuclear power project is expected to receive centralized approval by the end of this year. Nanfeng shares is the leader in the field of nuclear power ventilation equipment in China. Once the nuclear power project approval is reopened, the company's operating income and gross profit margin will increase significantly.

Investment suggestion: nuclear power is an important downstream industry of the company's business, and the bidding progress of nuclear power projects has a great impact on the company's performance. Affected by the progress of the AP1000 demonstration project, no new nuclear power units have been approved in China in 2017, and the company's short-term business is under pressure. Taking into account the industry prosperity and non-main business income and other factors, the adjusted EPS forecasts for 2017, 2018 and 2019 are 0.29,0.38,0.52 yuan respectively (the original forecast is 0.26,0.66,0.73 yuan), and the P / E value corresponding to the current stock price is 40 times, 30 times and 22 times respectively. We believe that the development of nuclear power is an important national strategy, and although the prosperity of the industry is affected by uncertain factors in the short term, the long-term development trend is still promising, and if the nuclear power project is approved and reopened, the company will benefit significantly, so the company still maintains a "recommended" rating.

Risk tips: (1) the approval speed of nuclear power projects continues to be lower than expected; (2) the sharp rise in raw material prices leads to a decline in gross profit margin; and (3) the macroeconomic downturn has led to a decline in downstream demand for ZTE equipment.