The 1H18 results were in line with expectations, and Dier Hanyu announced 1H18 results: operating income of 370 million yuan, -1.2% year-on-year; net profit attributable to the parent company of 63.33 million yuan, -34.3% year-on-year. In 2Q18, the company's operating income was 190 million yuan, -4.3% year-on-year; net profit attributable to the parent company was 39.02 million yuan, -27.8% year-on-year. Development trend In the first half of the year, the company's domestic sales revenue was +24% year on year, and export revenue was -12% year over year. Among them, the US dollar exchange rate conversion had a big impact. In terms of costs, under the influence of rising raw material costs and exchange rate fluctuations, the company's export and domestic sales margin declined by 6.0 pct and 7.5 pct year-on-year respectively, leading to a decrease in overall gross margin of 6.8 pct, which had a significant negative impact on the company's profitability. At the same time, due to the increase in new product development and brand investment in the first half of the year, the sales expense ratio and management expense ratio increased by 1.1 pct and 2.7 pct year-on-year respectively, further reducing the company's net profit margin, causing the decline in net profit in the first half of the year to be significantly greater than the decline in revenue. By product: 1) In terms of drain pump products, the company's ability to raise export prices is weak, domestic sales are adversely affected by the macro environment, and growth momentum is insufficient. 1H18 general and special drain pump revenue is +7.3% and +5.5%, respectively. 2) The company's unique dishwasher washing cycle pump has entered Whirlpool and Fangtai's supply chains, but has failed to enter other dishwasher leaders. The first half of the year was affected by customer order adjustments, and the company's washing pump revenue was -37.4% year-on-year. 3) The spa toilet business is still unable to expand. The company's business revenue other than drain pumps, condensate pumps, and washing pumps is -17.6% year-on-year. The company will continue to increase agent development efforts in the second half of the year. 4) The company's new energy auto parts are in the sample delivery stage, and future customer orders are uncertain. The company faces the risk of trade friction between China and the US: 1) The company's drainage pumps exported to the US account for ~ 30% of revenue. Whirlpool is one of the company's important customers. Currently, drain pumps face the risk of being subject to a 10% tariff. 2) The company plans to acquire a small intake valve company in Thailand for 3.3 million US dollars. On the one hand, it helps transfer production capacity exported to the US to Thailand to avoid tariffs; on the other hand, inlet valves and drain valves can be sold collaboratively. Profit predicted that the company's performance would decline, 2018/19 revenue was lowered by 8%/8%, and the 2018/19 profit forecast remained unchanged at 0.24/0.27 yuan. The valuation and recommendations maintained a neutral rating, and the target price was lowered by 9% to 6.50 yuan (excluding the impact of transferred stocks), corresponding to 27/24 times P/E in 2018/19, with room for 15% increase compared to the current stock price. The current stock price corresponds to 2018/19 24/21 times P/E. Risk Trade friction risk; exchange rate fluctuation risk; new business development risk.