Event: the company released a semi-annual report saying that in the first half of the year, the net profit belonging to the owner of the parent company was 64.0458 million yuan, down 89.73% from the same period last year, and the operating income was 5.245 billion yuan, down 32.16% from the same period last year.

Comment

Since the second quarter, the performance has gradually recovered: according to the announcement, the company's operating income in the second quarter was 3.023 billion yuan, down 11.5% from the same period last year, and the net profit was 123 million yuan, down 50.76% from the same period last year. Compared with the loss of 59 million yuan in the first quarter, the performance in the second quarter improved significantly, while the impact of the epidemic gradually faded in April-May, resulting in a sharp increase in the performance in the second quarter compared with the same period last year, but still decreased compared with the same period last year. Entering the third quarter, the company's production and operation have fully recovered, and the performance is expected to continue to improve.

Under the influence of the epidemic, the profits of the main coking industry declined: the company's total coke output in the first half of the year was 2.5828 million tons, down 14.33% from the same period last year, and the output of washing coal was 715700 tons, down 31.35% from the same period last year. The operating income of the coking business was 4.618 billion yuan, down 32.94% from the same period last year, the operating cost was 3.887 billion yuan, down 26.73% from the same period last year, and the gross profit margin was 15.83%, down 7.15% from the same period last year. The company's newly built production capacity Huasheng Chemical Project Coke oven has been ignited, indicating that the project will gradually enter the production period from the construction period. After the project is completed, it will achieve an annual production capacity of 3.85 million tons of coke, 300000 tons of ethylene glycol, 155000 tons of LNG, 60,000 tons of sulfuric acid, the first phase of 2000Nm3/h industrial high purity hydrogen, the second phase of 10000Nm3/h industrial high purity hydrogen production capacity.

Hydrogen energy business has made rapid progress: 1) Flying cars sold 214 vehicles of various types in the first half of the year, including 114 hydrogen fuel passenger cars, which are the key products. Flying cars have stepped up their technological research and development to develop new energy products that meet national and market standards. as of the end of June, the company has 18 models of production approval announcement, and included in the "energy-saving and new energy vehicle demonstration and application project recommended model catalogue". And the company plans to split the independent listing growth enterprise board of Flying Motor, in order to facilitate the independent financing of Flying Auto and promote the development of its own hydrogen fuel cell vehicle R & D, production and sales business. 2) in terms of Hongji Chuang Energy, more than 20 domestic and foreign customers have reached cooperation. So far, the order has exceeded 55 million yuan, successfully completing the first phase of the fuel cell cooperation project with an European car company. The membrane electrode products successfully passed the eight performance tests in the first phase and entered the next stage of durability test for a period of 8-12 months. In the first half of the year, Hongji Chuangneng promoted the development of ultra-thin proton membrane (8-10 micron) CCM, the preparation of high stability anti-reverse catalyst, the batch preparation of monolayer frame MEA and the domestic substitution of key materials. The research and development of these new products will enhance Hongji's initiative in mastering key technologies.

The third-quarter results are expected to improve significantly: according to the announcement, the company expects to achieve a net profit of 3.8-550 million yuan in the first three quarters, down 53.33% from the same period last year (having considered the transfer of Meijin shares in Tangshan Iron and Steel Co., Ltd.). It is estimated that the net profit in the third quarter is between 3.16 and 486 million yuan, an increase of 57.21% 141.79% over the same period last year, and the performance is expected to be greatly improved.

Investment suggestion: the net profit from 2020 to 2022 is estimated to be 8.78 billion RMB 2.371 billion respectively. Considering the improvement of the supply and demand pattern of the coke industry and the continuous development of the fuel cell vehicle industry in the future, the company's performance and cash flow are expected to improve continuously and steadily. Give a buy-An investment rating with a 6-month target price of 8.40 yuan.

Risk hints: the proportion of major shareholder pledge is high, major shareholders reduce their holdings, macroeconomic downturn leads to lower-than-expected coke demand, hydrogen energy project construction is not as expected.