Event: The company released its 2019 semi-annual report. The first half of the year achieved revenue of 350 million yuan, an increase of 38.8%; net profit of 113 million yuan, an increase of 78.4% over the previous year; of these, Q2 achieved revenue of 213 million yuan, an increase of 55.2% over the previous year, and net profit of 80.62 million yuan, an increase of 152% over the previous year. Performance slightly exceeded expectations, and gross margin increased sharply: The company's performance growth in the first half of the year was mainly due to the CIT/MIT series of fund-raising projects and the addition of production capacity for BIT series products. Due to the steady increase in market demand, the new production capacity was all digested by the market, and the parent company's industrial fungicide business achieved significant growth. In addition, Shenyang Baiao, an important subsidiary, also turned a loss into a profit. Affected by the “3.21” incident in Xiangshui, the prices of the company's F nitrile intermediate products and BIT series products using F nitrile intermediates as raw materials fluctuated greatly. According to the announcement, in the second quarter, the sales price of the company's F-nitrile intermediates rose 206% year on year, and the sales price of BIT series products rose 233% year on year, driving the company's Q2 gross margin to 58.8%, the highest level since listing. Fund-raising projects have been put into operation one after another, and the problem of insufficient production capacity has been alleviated: the company's fund-raising projects CIT/MIT and BIT were officially put into operation in April 2019. The total production capacity of the company's isothiazolinone drugs reached 30,000 tons, and the F-nitrile intermediates project with an annual output of 10,000 tons. The first phase of the project was put into operation in September 2017, and the second phase expansion project was put into operation in July 2019. Since then, the problems of insufficient production capacity and high unit costs of F nitrile intermediates have been solved. It has also provided sufficient and stable supply of raw materials for other projects in the company's F nitrile intermediates industry chain. In addition to satisfying the company's own use, it can achieve foreign sales, which will become another driving factor in improving the company's overall performance. We believe that the contribution of the company's new production capacity in Q2 was not fully reflected, and we look forward to better performance in Q3. Demand for industrial biocides is growing rapidly, the competitive pattern is orderly, and there is plenty of room for long-term growth: demand for industrial biocides is expected to maintain a growth rate of around 7% in the future, and isothiazolinone fungicides still have a lot of room for development in China. Due to factors such as cost and environmental protection, international chemical giants have drastically cut production of isothiazolinone drugs. Currently, only Dow Chemical and British Sol have retained part of their production capacity; most of the small domestic production capacity below the kilotons level continues to be withdrawn due to not being able to meet increasingly higher environmental and technical requirements, and the company has ushered in historical development opportunities as a leading domestic drug manufacturer. Currently, the company's exports have maintained relatively rapid growth. Relying on cost performance advantages and certification barriers, there is plenty of room for long-term growth. Investment advice: Net profit for 2019 to 2021 is estimated to be 2.8, 3.3 and 400 million yuan respectively, corresponding to PE of 21, 18 and 15 times, maintaining a buy-A rating, and a target price of 36 yuan for 6 months. Risk warning: downstream demand falls short of expectations, competitors resume production, etc.