Event: The company released its 2020 annual report. The company achieved revenue of 601 million yuan in 2020H1, a year-on-year decrease of 32.21%, achieved net profit of 0.29 million yuan, a year-on-year decrease of 68.33%, realized net profit after deduction of 0.24 million yuan, a year-on-year decrease of 72.50%, and net cash flow from operating activities of 35 million yuan, an increase of 151.13% over the previous year. Among them, Q2 achieved revenue of 457 million yuan, a year-on-year decrease of 16.45%, realized net profit of 41 million yuan, a year-on-year decrease of 31.67%, and realized net profit of 36 million yuan after deduction, a year-on-year decrease of 38.98%. Comment: Performance is under pressure, and gross margin has increased significantly. ① On the revenue side, H1's main wood-based panel business fell 33.49% year on year to 550 million yuan. It was mainly due to the Q1 pandemic, which delayed the resumption of work in the downstream furniture and home improvement markets, and company orders declined. The decline narrowed markedly in Q2 as work resumed and production resumed. ② In terms of gross margin, the overall gross margin of H1 increased 2.88pct to 26.15% year on year. Among them, the main wood-based panel business increased 4.54pct to 25.95% year over year, which is a drop in raw material prices (the upstream forest business fell 5.77pct to 48.69% year on year). ③ In terms of profitability, the cost rate during the H1 period increased 7.63 pct year on year to 21.63%, and Q2 increased 4.02 pct year on year to 16.63% year on year. Among them, the H1 management cost rate increased by 4.79pct to 9.98%, due to the impact of the epidemic and the factory's downtime costs. “One factory, one policy” promotes sales upgrading, and overseas companies promote new business development. ① The company adopted the “one factory, one policy” strategy and actively grasped the rise of the “home economy” concept after the epidemic to promote sales upgrades. It achieved a balance between production and sales in May, and sales exceeded production in June. ② In February 2020, the company established New Zealand Fenglin Supply Chain Co., Ltd. to carry out import and export business such as cross-border log trade to promote the implementation of the company's overseas timber resource reserves and domestic port timber processing strategies. It is conducive to the company's overseas business development and production of high value-added products. Investment advice: According to the profit forecast slightly lowered in the interim report, considering the valuation switch to increase the target price, it is estimated that EPS for 2020-2022 will be 0.12, 0.17, and 0.21 yuan, respectively, and the corresponding PE will be 24.21X, 17.17X, and 13.98X, respectively. Maintain a “buy” rating. Risk warning: downstream demand falls short of expectations; raw material prices have risen sharply.