Performance growth exceeded market expectations. The company released its semi-annual results for the year ending September 30. Sales revenue increased 37% year on year to 1.64 billion yuan, and net profit increased sharply by 117.1% year on year to 220 million yuan. Performance growth exceeded market expectations. Earnings per share were RMB 0.58, and the board of directors announced a dividend of HK$0.2 per share. Precision lathe sales continued to grow rapidly. The main driving force behind the company's revenue growth is the rapid increase in precision lathe sales, which increased 45.6% year on year to 1.41 billion yuan. While precision automatic lathes remain ahead, the precision turret lathe market has been widely expanded. Since precision turret lathes are an extremely fragmented market and also a broader market, we believe that the company still has the potential to continue to increase its market share in this field. Meanwhile, sales of precision machining centers fell from 110 million yuan in the first half of 2018 to 69.89 million yuan, mainly due to the decline in the growth rate of the smartphone industry, and demand for precision machining centers also shrank. Gross margin expanded by 5.6 percentage points. The company's gross margin expanded far faster than market expectations, increasing by 5.6 percentage points to 25.2%, mainly due to increased sales volume and increased capacity utilization, thereby further achieving economies of scale. As new production capacity is put into operation, we think gross margin may decline in the future. Maintain a buy rating. The company has repaid all of its interest-bearing liabilities, and financial expenses were eliminated in the first half of the year. Cash on hand is 230 million yuan, and the overall financial situation is good. The company's fourth workshop plant renovation will be completed within this fiscal year and put into use in FY2020, and the company's production capacity will be further expanded. Although the domestic manufacturing industry is currently showing signs of decline, the domestic manufacturing industry is still in a period of transformation and upgrading, and the trend of CNC precision machine tools replacing traditional machine tools is unchangeable. We maintain the company's “buy” rating, and in view of changes in the overall market environment, we lowered the company's target price to HK$10.8. Risk warning: Product orders have declined, and production capacity expansion has fallen short of expectations