Event: Shangwei released its 2019 semi-annual report. During the reporting period, the company realized revenue of 908 million yuan, an increase of 36.04% over the same period last year; net profit of 63 million yuan, an increase of 135.53%; basic earnings per share of 0.12 yuan per share, an increase of 140% over the same period last year; and a weighted average return on net assets of 4.34%, an increase of 2.48pcts over the same period last year.

Various businesses blossom to promote rapid growth: in the first half of the year, the company continued to consolidate and open up domestic and foreign markets, and achieved all-round business growth. specifically: 1) the company's competitive advantage in steel smelting, petrochemical, electrical equipment and other traditional advantage areas has been continuously consolidated and strengthened, service level and market share have been continuously improved, and sales revenue reached 540 million yuan in the first half of the year, a sharp increase of 98.53% over the same period last year. 2) in terms of rail transit, in 2018, the company successfully developed category B1 cable products with high flame retardancy and low release for rail transit, which was widely recognized. in the first half of this year, the company successively participated in the construction of subway projects in more than 20 cities, including Beijing, Xi'an and Chengdu. as well as the construction of intercity rail lines such as Shanghai-Nanjing Line, Shanghai Stock Connect Line, Nanjing-Qi Line, Changgan Line and Jingyuan Line, the sales revenue reached 159 million yuan, a sharp increase of 103.85% compared with the same period last year. 3) in the field of nuclear power and new energy, in the first half of the year, the company successfully won the order for the first demonstration project of "Hualong No. 1" in the world-- the No. 5 unit project of Fuqing Nuclear Power Station and the Shidao Bay Nuclear Power Station-- the demonstration project of the world's first high-temperature gas-cooled reactor nuclear power plant. At the same time, orders for photovoltaic cables increased significantly, and orders for wind power maintained a steady growth, making this part achieve sales revenue of 127 million yuan. A sharp increase of 262.86% over the same period last year 4) overseas expansion has blossomed and borne fruit. Over the past 18 years, the company has set up a special international division and carried out strategic cooperation with Sinosteel, focusing on expanding countries along the Belt and Road Initiative route. In the first half of this year, the company's overseas market has achieved steady growth, with sales revenue reaching 139 million yuan, an increase of 34.95% over the same period last year.

The product structure has been continuously optimized, and the management and control level of accounts receivable has been significantly improved: the comprehensive gross profit in the first half of the year reached 21.05%, an increase in 3.87pcts compared with the same period last year, reaching the highest level in recent years, making the growth rate of net profit much higher than the growth rate of revenue. This is mainly due to the company's continuous optimization of product structure, the rapid growth of market share of high value-added products, and the proportion of sales revenue reached 31.50% in the first half of the year, increasing 14.56pcts over the same period last year. In addition, in recent years, the company has continued to improve the management of accounts receivable, strengthening the management of accounts receivable in advance, during and after the event, so as to reduce the risk of accounts receivable recovery. In the first half of the year, the risk prevention and control level of accounts receivable was significantly improved, the proportion of accounts receivable in revenue decreased by 2.11pcts, and the recovery rate of sales funds increased by 22.95pcts.

The high performance requirements of equity incentives demonstrate confidence: in 2018, the company completed the award of 9.54 million restricted shares to 135 incentive targets, including company directors, senior managers, middle managers and core backbones, corresponding to the unlocking conditions of 2018-2020 net profit of 0.5x100 million yuan respectively. The high requirements of equity incentives fully demonstrate the management's confidence in the future of the company.

Investment advice: we estimate that the company's revenue from 2019 to 2021 will be 100 million yuan in 22-29-37, with a growth rate of 38%, 33%, 28%, respectively, and the net profit of its mother will be 1.30%, 211%, 265 million yuan, respectively, with a growth rate of 124%, 63%, 26%, and maintain the "increase in holdings-a" rating, with a 6-month target price of 10 yuan.

Risk tips: intensified competition has led to a sharp decline in gross profit margins and a sharp rise in the prices of major raw materials such as copper.