1H19 is basically in line with our expectations Coney Mechatronics announced 1H19 results: operating income of 1.82 billion yuan, an increase of 0.6% over the previous year; net profit to mother was 140 million yuan, which turned a loss into a profit over the same period last year, and corresponding earnings per share of 0.14 yuan, which is basically in line with our expectations. 2Q19 achieved revenue of 990 million yuan, a year-on-year decrease of 2.1%. Net profit to mother was 70 million yuan, turning a loss into a profit compared to the same period last year. The main business achieved rapid growth, and gross margin declined slightly. In 1H19, the company's main rail transit business revenue was 1.41 billion yuan, a sharp increase of 51.6% year on year; NEV parts revenue was 194 million yuan, up 17.3% year on year. Consolidated gross margin decreased by 1.9ppt to 30.6%. Expense rates increased slightly during the period; operating cash flow recovered. The cost ratio of the 1H19 company increased slightly by 1.1 ppt during the period, and management/R&D/finance cost ratios changed by +1.8/-0.9/+0.2ppt, respectively. Various businesses operated normally in the first half of this year, and the company's net interest rate changed to 7.4%. The cash outflow from operating activities was 250 million yuan, less than the same period last year by 240 million yuan, mainly due to restrictions on Longxin Technology's large capital during the same period last year. Development trend Longxin Technology is expected to complete the divestment within this year. On August 5, 2019, the sale of 100% of the shares of Longxin Technology, a wholly-owned subsidiary, was reviewed and approved by the Extraordinary General Meeting of Shareholders. We expect the divestment of Longxin Technology to be completed within this year, and the company will refocus on the main rail transit business. The main rail transit business will maintain steady revenue growth. As of June 2019, the amount of the company's on-hand orders was 3,988 billion yuan, an increase of 5.8% over the beginning of the year. The gradual delivery of on-hand orders will ensure a steady increase in the company's revenue. In addition, the gate fan module independently developed by the company has completed multiple channel loading tests in Nanjing, Wuhan and other places, and the rail transit gate series product line is even richer. The NEV door system business is developing steadily. Against the backdrop of increased competition in the new energy auto parts industry, the new energy bus door system independently developed by the company is progressing steadily. Currently, it has established cooperative relationships with customers from high-quality OEMs such as Nanjing Jinlong, Suzhou Jinlong, BYD, Yinlong Bus, Zhongtong Bus, Asia Star Bus, and Sunwin Bus. We believe that with technology and customer advantages, the company's market share is expected to increase in the future. Profit forecast and valuation We maintain the company's profit forecast for 2019/20 unchanged. The company's current stock price corresponds to 17.4/14.2 times P/E in 2019/20. We maintain a neutral rating and the company's target price of 5.45 yuan, which corresponds to 18/15 times P/E in 2019/20, which has 3.6% upside compared to the current stock price. The growth rate of new orders placed on the risk track is slowing down.