In 2019, H1 achieved revenue of 1,056 million yuan, +5.11% year-on-year, net profit of 134 million yuan, and net profit of 134 million yuan, +2.13% year-on-year; net profit after deducting non-regained net profit of 101 million yuan, -13.11% year-on-year. The decline in the company's gross margin is compounded by increased financial pressure, and short-term performance is under pressure. However, in the long run, the company, as the leading aluminum electrolytic capacitor in China, is expected to continue to benefit from the trend of capacity transfer and maintain its “buy” rating. Q2 Performance continued to decline, dragging down the company's performance in the first half of the year. In the first half of 2019, the company achieved revenue of 1,056 million yuan, +5.11% year-on-year, net profit of 134 million yuan, +2.13% year-on-year; net profit after deduction of 101 million yuan, -13.11% year-on-year, of which non-recurring profit and loss of +018 million yuan was mainly due to an increase in financial income (+0.2 billion yuan). In terms of a single quarter, the company achieved revenue of 532 million yuan in Q2 in 2019, -7.90% (Q1 was +22.73%), and realized net profit of 75 million yuan, or -5.82% year-on-year (Q1 was +14.53%); net profit after deduction of net profit of 57 million yuan, -25.72% year-on-year (Q1 was +11.48%). The decline in gross margin and the increase in financial pressure on convertible bonds are the main reason for the pressure on the company's performance. On the cost side, due to product restructuring, the company's gross margin for the first half of the year was 28.8%, down slightly -1.3% year on year. On the cost side, the company's sales/management/R&D/financial expenses for the first half of the year were +0.27/-0.11/0.55/1.01 pcts, respectively, and the overall period expense rate was +1.73 pcts to 16.45%. Among them, the company's issuance of 691 million yuan of convertible bonds in 2018 increased financial pressure in 2019. Interest expenses in the first half of the year increased, and interest expenses in the first half of the year reached 115 million yuan, which is an important reason why the company's performance in the first half of the year was under pressure. Bond-conversion fund-raising projects have been implemented one after another, and subsequent revenue expansion can be expected. The company is a leading aluminum electrolytic capacitor in China. It is actively deploying the fields of high-performance aluminum electrolytic capacitors, MLPC, and chemical foils, and is speeding up the layout of the upstream industry chain. Currently, the company's convertible bond fundraising project continues to advance. The progress of the second phase of the chemical foil production line and the second phase of the civil engineering project is 100%/99%, respectively. In addition, Japanese manufacturers are under pressure on the cost side, gradually shifting to high-end markets such as communications and automobiles, and withdrawing from low-end markets. However, the company is a leading domestic aluminum electrolytic capacitor company with the highest lighting market share in the world. At the same time, it is vigorously developing consumer and industrial markets, actively expanding production and promoting research and development of high-performance products, and is expected to undertake capacity transfers. As new production capacity is released one after another in the second half of the year, the company's revenue can be expected to expand. Risk factors: Competition increases risk; fund-raising projects fall short of expectations. Investment advice: Considering weak downstream demand and increasing financial pressure on the company, we lowered the company's 2019/20 EPS forecast to 0.85/0.98 yuan (the original forecast was 0.96/1.21 yuan) and added the 2021 EPS forecast to 1.13 yuan. We are optimistic about the company's leading position in the field of aluminum electrolytic capacitors in the long term and maintain the “buy” rating.