Incident: Matsushima announced the interim report. Although revenue fell 3% year on year, net profit from the company increased by 84% year on year and 235% after deduction. The high performance increase reflects the company's strong ability to adjust management in a weak industry. The volume and quality of air conditioners for large and medium customers were reduced, and gross margin increased by 5 percentage points. Although the company's air conditioning shipments to Dazhong customers fell 17% in the first half of the year, Dazhong customer revenue fell by only 11%. In the product structure, the company's new energy buses fell by only 13%, which is superior to the overall level. Under weak circumstances, companies prefer orders with higher prices and greater profitability to ensure the quality of business. Car air conditioning is progressing steadily, and the joint venture system is gradually breaking through. The passenger car industry was generally sluggish in the first half of the year, and sales volume fell 14%, but the company's car air conditioning business was better than the overall industry. Revenue fell by only 4%. The number of joint venture customers in the customer structure increased further, and products such as condensers were recognized by joint venture customers. The air conditioning market for construction machinery has become a potential blue ocean market. As the overall product structure of construction machinery vehicles was upgraded, their air conditioning assembly requirements continued to rise. The company actively expanded the construction machinery air conditioning market in the first half of the year and established strategic partnerships with Sany, XCMG, etc. In the future, construction machinery air conditioning will become a new growth point for the company. Investment advice: We expect the company to return net profit of 270 million yuan to 350 million yuan in 2019 and 2020. The current stock price is less than 10 times the dynamic valuation corresponding to 2019, which is extremely cost-effective, so we recommend that you pay active attention. Risk warning: The progress of air conditioning support for passenger cars fell short of expectations; the decline in subsidies for new energy buses affected the level of profitability.