1H20 revenue is + 21.9% year-on-year, net profit is + 11.0% year-on-year, income growth is lower than the lower limit of the guidance, and profit growth is at the lower edge of the guidance range. Overcoming the epidemic affects the steady growth of 2Q20 revenue and profits. The gross profit margin has declined and the cost control has been excellent. On-hand orders to provide performance guarantee, the second half of the year may usher in a dense winning bid. Adhere to high-quality growth, profitability and profit quality continue to be healthy and excellent. We maintain the 2020-2022 EPS forecast of 1.60, 2.15, and the current price is 33x/24x/18x, and we maintain the company's target price of 62.49 (39x/29x for 2020, PE, 2021) and "buy" rating.

1H20 revenue is + 21.9% year-on-year, net profit is + 11.0% year-on-year, income growth is lower than the lower limit of the guidance, and profit growth is at the lower edge of the guidance range. Overcoming the epidemic affects the steady growth of 2Q20 revenue and profits. Company 1H20 revenue 1.09 billion yuan, year-on-year + 21.9%; gross profit 160 million yuan, year-on-year + 13.3%; return to the mother net profit of 88.547 million yuan, year-on-year + 11.0%. The revenue growth rate is slightly lower than the lower limit of the guidance range (23.5% copyright 43.7%). We judge that it is mainly due to the delay of delivery and revenue recognition caused by the disturbance of the epidemic, and the profit growth rate is at the lower edge of the guidance range (9.0% muri 22.8%). The lower profit growth rate is mainly due to the reduction of gross profit margin caused by the company's increased market development. In a single quarter, 2Q20 revenue / net profit was + 31.9% compared with the same period last year, and the company overcame the impact of the epidemic to achieve a steady increase in revenue and profit. The company proposes to pay a dividend of RMB0.40 per share, with a dividend rate of 25 per cent calculated by EPS at the end of 2019.

The gross profit margin has declined and the cost control has been excellent. The company's 1H20 gross profit margin was 15.1%, down 1.2pcts from the same period last year, which we think is mainly due to the company's efforts to open up new markets and the high cost of pre-running-in. The expense rate during 1H20 is from-0.4pct to 4.4%, of which the sales / management / R & D / financial expense rate is 0.7%, 2.9%, 0.5%, 0.4%, year-on-year-0.1/-0.3/+0.1/-0.1pct. The overall cost control is excellent under the influence of the epidemic. The company's 1H20 impairment loss was 8.19 million yuan (+ 58.3% compared with the same period last year), mainly due to an increase of 3.78 million yuan in the impairment loss of contract assets. In terms of cash flow, the net operating cash outflow was 58.32 million yuan (21.79 million yuan in the same period last year). The increase in net outflow was mainly due to the substantial increase in profits in 2019 and the concentrated payment of year-end bonus and income tax in the first half of the year. we expect the net operating cash flow for the whole year to keep pace with the net profit; the net investment cash outflow of 100 million yuan (the net inflow of 100 million yuan in the same period last year) is mainly due to the increase in the purchase of financial products. The net inflow of fund-raising cash was 750 million yuan (compared with a net outflow of 53.34 million yuan in the same period last year), mainly due to the large amount of funds raised by the IPO in June this year.

On-hand orders to provide performance guarantee, the second half of the year may usher in a dense winning bid. The company 2Q20 newly signed order 550 million yuan, has won the bid unsigned order 510 million yuan; as of 1H20, has signed unfinished orders of 3.72 billion yuan, in-hand orders / 2019 operating income ratio of 1.6 x, on-hand orders to provide a guarantee for revenue and profit growth. In addition, under the influence of the epidemic, the proportion of owners adopting the strategic agreement mode of bidding this year is lower than that of previous years, and the proportion of ordinary tendering and bidding is expected to pick up; considering that the orders of the ordinary bidding mode are mainly concentrated in the fourth quarter of each year, we expect that the company may usher in intensive winning bids in the second half of the year, which will boost the follow-up performance growth.

Adhere to high-quality growth, profitability and profit quality continue to be healthy and excellent. 1) in terms of profitability, the company's 1H20 net interest rate is 8.2%, which is higher than that of 2019, and 0.8pct is lower than that of the same period last year. It still maintains a good profit level under the influence of the epidemic. 2) in terms of profit quality, the company's 1H20 cash-to-cash ratio is 82.7%, which is 0.7% higher than that of the same period last year. 1H20 accounts for 103% of income, and 15pcts is lower than that of the same period last year. With the further improvement of fine decoration penetration and the high prosperity of the market, we expect the company to maintain good profitability and profit quality by virtue of fine management and high-quality customers while achieving scale expansion.

Risk factors: residential sales growth is not as expected; fine decoration penetration is not as good as expected.

Investment advice: considering the further improvement of fine decoration penetration, the second half of the year may usher in intensive bid winning, the company's profitability and profit quality continue to remain healthy and excellent, we maintain the 2020-2022 EPS forecast of 1.60 EPS 2.15 PE 2.88 yuan, the current price corresponding to 33x/24x/18x, we maintain the company's target price of 62.49 yuan (corresponding to 2020 PE 2021 39x/29x) and "buy" rating.