The company announced its 2019 semi-annual report. 2019H1 achieved operating income of 1,049 million yuan, an increase of 31.79% over the previous year; realized net profit of 29 million yuan, an increase of 99.62% over the previous year; and realized net profit of 225 million yuan, an increase of 51.01% over the previous year. Zhonghe Technology's 2019H1 revenue and profit maintained a high growth rate. The energy saving and environmental protection sector was relatively stable, and the rail transit sector's business volume grew rapidly. The urban rail industry is booming, orders for self-developed signal systems have increased, revenue from automatic ticketing systems has increased dramatically, and revenue and profit growth in the first half of 2019 has been high. In 2019H1, the company achieved revenue and net profit of 1,049 million yuan and net profit of 225 million yuan respectively, up 31.79% and 51.01% year on year, and the performance growth rate was high. The company's main business content is the smart transportation sector and the energy saving and environmental protection sector. The smart transportation sector mainly includes rail traffic signal systems and automatic ticket sales and inspection systems. The environmental protection and energy saving sector mainly includes business content such as water treatment business, monocrystalline silicon and its products, and flue gas desulfurization. The main reason the company achieved high revenue growth in the first half of 2019 was that the smart transportation sector achieved high revenue growth. The smart transportation sector revenue increased 74.56% year on year, of which signal systems achieved revenue of 423 million yuan, an increase of 62.39% year on year; automatic ticketing systems achieved revenue of 247 million yuan, a sharp increase of 196.21% year on year, and automatic ticketing system revenue accounted for 23.56% of total revenue, up 7.71 percentage points year on year; mobile payment business revenue was only 4.76 million yuan, down 88.85% year on year; this portion of revenue was only 4.76 million yuan, a year-on-year decrease of 88.85%, this portion of revenue It is relatively small; the revenue of the environmental protection and energy saving sector fell 8.63%. At the industry level, urban rail transit ushered in a peak of construction and traffic opening, and the industry maintained a boom. In the first half of 2019, the company's smart transportation business maintained a rapid development trend. The total amount of contracts signed was 1.45 billion yuan, an increase of 27.51% over the same period last year. Among them, the company won 3 bids for a total of 3 domestically developed signal systems, with a total bid amount of 992 million yuan, accounting for 77.77% of the bid amount for new signal systems this year. Orders for self-developed signal systems have increased, and volume has continued. The overall gross margin increased slightly, and the gross margin of the water treatment business increased markedly. The gross margin of signal systems in the rail transit sector declined slightly year over year, and the gross margin of automatic ticket sales and inspection systems increased year over year. In 2019 H1, the company's gross margin was 29.57%, an increase of 0.26 percentage points over the previous year; the company's net profit margin was 2.75%, an increase of 0.93 percentage points over the previous year. By business sector, the gross margin of rail traffic signal systems in the 2019H1 smart transportation sector was 34.47%, down 1.57 percentage points from the previous year. The main reason is that the revenue share of non-self-developed signal systems in rail traffic signal systems in the first half of the year was still high and the gross margin declined year-on-year, but the gross margin of the company's self-developed signal systems was higher than that of non-self-developed signal systems. We expect the company's self-developed system revenue share to continue to increase, which will increase the company's gross margin level; the gross margin of automated ticketing systems was 24.46%, up 4.72 percentage points year on year. The gross margin of the water treatment business was 31.88%, and the gross margin increased sharply by 8.89 percentage points, affecting the company's overall gross margin increase in the first half of the year. Credit impairment losses affected profits in the short term, but the period's expense ratio declined year over year, management improved, and the main business continued to improve. The credit impairment loss of 2019H1 company was 43.22 million yuan. According to information disclosed in the company's semi-annual report, credit impairment losses mainly include other bad receivable losses, long-term accounts receivable bad debt losses, and bad receivables losses. Compared with bad debt losses of 14.85 million yuan in the same period last year, bad debt losses increased 191.04% year-on-year, affecting net profit in the first half of the year. The cost rate for the 2019H1 period was 22.14%, down 3.34 percentage points from the previous year; among them, the sales expense ratio was 2.45%, down 0.23 percentage points from the previous year; the R&D expense rate and management expense ratio were compared on the same comparable scale; the 2019H1 management cost rate plus the R&D expense ratio was 15.34%, down 0.56 percentage points year on year; and the financial expense ratio was 4.35%, down 2.55 percentage points year on year. Management has improved, and the main business continues to improve. Profit forecasts and investment ratings: The urban rail transit industry remains prosperous, and the performance of the company's smart transportation sector is improving; the performance of the energy saving and environmental protection sector is steady; short-term profit or impairment losses from credit use; long-term optimism about self-development system growth and gross margin increases. The company's net profit from 2019 to 2021 is estimated to be 1.34/220/324 million yuan, maintaining the “increase in holdings” rating. Risk warning: The volume and gross margin of self-developed signal systems fell short of expectations; the performance of companies in the energy saving and environmental protection sector fell short of expectations; and the competitive landscape of the industry worsened.