Event: The company released its 2018 semi-annual report. In the first half of 2018, the company achieved operating income of 1,347 billion yuan, up 23.91% year on year; net profit attributable to shareholders of listed companies was 53.882 million yuan, up 67.14% year on year; non-net profit attributable to shareholders of listed companies was 5.012,900 yuan, up 57.55% year on year; and basic earnings per share of 0.0627 yuan/share, up 67.20% year on year. Comment: A leader in the air compressor industry, determined to transform the world's leading renewable energy operating multinational company. Since its establishment, the company has focused on air compressor manufacturing business. Among them, the screw air compressor manufacturing scale has reached number one in Asia and third in the world. In recent years, the company has developed overseas geothermal power generation markets with its original “one well, one station” modular geothermal power plant model, challenging the current mainstream central power plant geothermal power generation technology. It aims to have more than 1 GW of geothermal resource development rights over the next 3-5 years, and currently has geothermal power generation projects in the US, Hungary and Indonesia. The expansion of the company's geothermal power plant operation scale and the increase in the proportion of future modular power plant models will also boost the company's upstream product sales, forming a good resonance. The performance of screw machines has increased dramatically, and the company's ability to control costs has increased. In recent years, the company has focused on developing the application of screw expansion generators in overseas geothermal power generation markets and the overseas market of screw air compressors. Screw machinery products are the company's main source of performance. In the first half of 2018, it achieved revenue of 1,166 billion yuan, an increase of 30.19% over the previous year, accounting for 86.57% of the company's total revenue, accounting for 86.57% of the company's total revenue, achieving a gross profit margin of 24.82%, down 1.96 percentage points from the previous year. The company's piston machine, pressure vessel and casting businesses achieved revenue of 0.40, 0.37 and 121 million yuan respectively, with year-on-year increases of 6.90%, 14.01% and -2.36%, and gross margin increases of -1.89, -3.47 and 0.87ppt, respectively. Affected by the decline in gross margin of major products, the company's overall gross margin fell 1.73 percentage points to 24.08%. The company's cost control capability improved in the first half of the year, and the cost rate for the period fell 1.83 percentage points year-on-year to 18.28%. Construction of the geothermal power plant project has accelerated, and the progress has not been affected by the earthquake in Indonesia. In June of this year, the first phase of the company's SMGP project in Indonesia began grid-connected power generation. This is another overseas geothermal project that achieved grid-connected power generation after the Turawell Geothermal Power Generation Project in Hungary in November last year. As of the first half of 2018, the company's projects under construction were 2,324 billion yuan, a record high in recent years. Including the SMGP project in Indonesia, the SGI project, and the US geothermal project, it is progressing at an accelerated pace. The company issued a clarification notice in August. Sumatra and Flores, where the company's geothermal projects are located, are far from the epicenter of the Indonesian earthquake, so project construction was not affected. At the same time, the company has insured various types of insurance, including natural disaster insurance, etc., effectively reducing uncontrollable risks. The R&D team has accumulated a deep accumulation, and the share of R&D investment has maintained a trend of increasing year by year. The company's screw machinery R&D team used Dr. Tang Yan, a top international screw expert and selected for the “National Thousand Talents Program”, as a technical leader, and also vigorously recruited senior professionals in the field of geothermal power generation from around the world, and formed a geothermal development platform for KS ORKA in Singapore and OME in the US and a global geothermal development team. In the first half of 2018, the company spent 35 million yuan on R&D expenses, an increase of 37.64% over the previous year, and its share of revenue increased by 0.26ppt to 2.62%, maintaining a trend of year-on-year growth. Profit forecast and rating: We expect the company's operating income in 2018, 2019, and 2020 to be 3.647 billion yuan, 5.459 billion yuan, and 8.033 billion yuan respectively, net profit of 249 million yuan, 406 million yuan and 698 million yuan respectively, and EPS of 0.29, 0.47, and 0.81 yuan respectively. The price-earnings ratio corresponding to the closing price on August 22 (11.88 yuan) is 41, 25 and 15 times, respectively. Based on the company's broad prospects in the geothermal sector and the company's good technical reserves, We maintain the company's “buy” rating. Risk factors: Overseas geothermal project investment implementation falls short of expectations; risk of loss of core technical personnel; increased financial costs.