The net profit of 2019H1 was 72 million yuan, down 8.15% from the previous year, in line with expectations. On August 27, the company released the 2019 semi-annual report. On August 27, 2019H1 achieved revenue of 295 million yuan, a decrease of 2.75% over the previous year; the net profit of the mother was 72 million yuan, down 8.51% year on year, in line with expectations. The decline in revenue was mainly due to a decline in sales of NdFeB adhesives for hard drives, and the decline in net profit was mainly due to factors such as a decrease in revenue, a slight decrease in gross margin of some products, and exchange profit and loss. As a global leader in bonded NdFeB, we expect a steady increase in sales of magnets for automobiles and energy-saving motors. At the same time, the sales volume and revenue share of samarium cobalt magnets and hot-press magnets are expected to increase further. We expect EPS of 0.55/0.62/0.68 yuan in 19-21, maintaining the “increase in holdings” rating. Sales of magnets for automobiles and energy-efficient motors increased, and demand for hard drives declined. According to the company announcement, the revenue of 2019H1 bonded NdFeB magnets was 278 million yuan, down 0.47% year on year, and gross profit margin was 34.05%, up 0.37 pct year on year. Among them, demand for magnets for automobiles and some energy-efficient motors increased, but sales of magnetic materials for hard drives declined sharply year over year. The company continues to optimize the product structure and vigorously develop magnetic materials for automobile motors and high-efficiency and energy-efficient motors. The price of 2019H1 raw materials fluctuates greatly, and the company actively negotiates prices with upstream and downstream to guarantee profit; according to Baichuan information, the price of 2019Q2 praseodymium oxide rose 23%, the price of lithium oxide increased 31%, and the increase in dysprosium oxide by 32%; on the one hand, the price increase of raw materials was catalyzed by trade friction between China and the US, and rare earths were valued as a national strategic resource; on the other hand, the supply of medium and heavy rare earths became tight due to the decline in imported mines in Myanmar. Orders for new magnets fluctuate. In the long run, revenue is expected to continue to increase. In the long run, 2019H1's new magnet revenue is about 17 million yuan, a decrease of about 30% over the previous year. Sales of both hot-pressed magnets and samarium cobalt magnets have declined. We believe that since sales of new magnets are still low, order fluctuations are within the normal range. Samarium cobalt magnets have characteristics such as high magnetism, low temperature coefficient, and corrosion resistance, and are widely used in aerospace, military equipment and other fields. Hot pressed magnets can replace some sintered magnets, mainly used in various high-efficiency and energy-saving motor fields such as automotive EPS, power tools, and servo motors. The company is currently working to reduce its production costs. We believe that once the bottleneck of technology cost reduction is broken, capacity utilization is expected to be further released. In the long run, we expect sales of new magnets to continue to increase. As the global leader in bonded NdFeB, new products are expected to be released steadily. The “increase in holdings” rating We maintain our original profit forecast. The estimated revenue for 19-21 is 7.14/8.28/949 million yuan, and net profit is 1.78/200/220 million yuan. Rare-earth permanent magnet companies unanimously anticipated the average PE value of 44x in '19. We gave 42-44XPE according to the net profit of the mother in '19, raising the target price to 23.10-24.20 yuan (previous value: 14.85-16.50 yuan), and the “increase in holdings” rating. Risk warning: Prices of rare earth raw materials fluctuate greatly; the market expansion of new magnetic materials falls short of expectations.