Event: the company released its semi-annual report for 2020, with operating income of 225 million yuan during the reporting period, an increase of 4.61% over the same period last year, and a net profit of 18.01 million yuan, an increase of 35.48% over the same period last year.

1. The performance has grown rapidly, and the business scale and profitability in the nuclear industry have improved rapidly. The company's main business is concentrated in the rail transit, aerospace and nuclear industries, with a total operating income of 225 million yuan (+ 4.61%) and a net profit of 18.01 million yuan (+ 35.48%) in the first half of the year. From a business point of view, the income of railway vehicle operation safety inspection and maintenance and intelligent warehousing system is 55.4105 million yuan (- 48.13%), the income of intelligent test simulation system and components of micro-system and control department is 89.3871 million yuan (+ 11.65%), and that of nuclear industry and special environment intelligent equipment system is 80.1295 million yuan (+ 184.90%). During the reporting period, the business scale of the nuclear industry expanded rapidly, and the gross profit margin of sales increased 14.83pct compared with the same period last year. At present, the company has established the overall status of related products, and the supply contracts involved will be completed one after another within the year, and the business in the nuclear industry is expected to continue to develop steadily in the future.

2. The effect of cost control is remarkable, and the operating cash flow is greatly improved. During the reporting period, the gross profit margin on sales fell 3.98pct to 27.07% from the same period last year, while the net profit margin increased by 1.82pct to 8.01% over the same period last year. From the cost side, during the reporting period, the expense rate (including R & D) decreased by 4.71pct to 21.62% compared with the same period last year, of which the sales / management / R & D / financial expense rate decreased by 0.60/0.47/2.53/1.11pct. At the end of the reporting period, accounts receivable accounted for 22.13% of total assets, down from 25.91% in the same period last year. Sales rebates improved significantly. Net cash flow from operating activities was 73.3556 million yuan, an increase of 482.81% over the same period last year.

3. The position of the platform is clear, and it is expected to benefit from the mechanism reform and asset securitization of the fifth aerospace institute. The company is positioned as the industrial development platform, system and mechanism innovation platform and asset securitization platform in the field of intelligent equipment of the Fifth Aerospace Academy. The fifth aerospace institute, the indirect controlling shareholder of the company, is not only the main construction force in the field of domestic space technology, but also the first batch of pilot units for the restructuring of scientific research institutes. 2020 is the first year of the three-year action plan for the reform of state-owned enterprises, and the reform of the system and mechanism of military and state-owned enterprises is expected to continue to deepen. As a clearly defined listing platform under the Fifth Aerospace Academy, the company is expected to benefit from the in-depth promotion of the reform work in all aspects of the Fifth Aerospace Academy.

4. Profit forecast and investment suggestion: the revenue from 2020-2022 is estimated to be 1444Universe 2039Universe 2.922 million, the net profit from the parent is 2.29Universe 0.26Universe, and the EPS is 0.32 Placement 0.450.65. The current share price corresponds to PE, which is times as much as 48-34-24, and the target price is raised to 24.30RMB to maintain the "Buy" rating with reference to the 54X PE given by the comparable company in 2021.

5. Risk hint: the progress of special market promotion is not as expected, and the expansion of commercial market is not as expected.