The 1H20 performance was slightly lower than expected. The company announced 1H20 results: revenue of 1.48 billion yuan, down 12.5% year on year; net profit of 160 million yuan, down 36.4% year on year, corresponding to profit of 0.18 yuan per share, slightly lower than expected, mainly due to the decline in demand due to the pandemic. As the resumption of work and production progressed, the company's performance gradually recovered. In 2Q20, the company achieved a net profit of 105 million yuan, an increase of 89% over the previous month. The price of hazardous waste has declined due to the epidemic, and the company's business is under pressure. Due to the impact of the epidemic, the resumption of work by upstream enterprises has been delayed, demand for hazardous waste disposal has declined and superimposed competition has intensified. The revenue of 1H20's main hazardous waste business declined markedly. Among them, the resource business fell 14.9% year on year to 480 million yuan, and the harmless disposal business fell 13.3% year on year to 690 million yuan. At the same time, due to the decline in sales prices of end-of-resource disposal products, the gross margin of the resource-based business decreased by 3.7ppt to 23.2%, and the gross margin of harmless disposal stabilized at 50%. The company's revenue declined, but due to depreciation and rigid labor costs, the fee rate during the 1H20 period increased by 2.1ppt to 22.3%; benefiting from the issuance of the first medium-term note at an interest rate of 3.2%, the company's financing costs decreased by 0.55ppt to 4.35% year-on-year; due to the decline in the company's sales revenue, the company's 1H20 operating cash flow fell 31.6% year on year to 400 million yuan. Development trends The company focuses on the steady development of hazardous waste, and has sufficient projects under construction. 1H20 has 4 hazardous waste projects put into operation, increasing production capacity by a total of 88,800 tons/year; projects under construction/proposed construction have a total production capacity of 517,500 tons, about 25% of the company's production capacity in operation, with sufficient reserves. 2H20 plans to add 97,400 tons/year of landfill capacity and 30,000 tons/year of incineration capacity. The steady operation of production capacity may drive the company's performance in the future. The debt structure has been optimized, and financing costs have been reduced. In April of this year, the company registered 1.5 billion yuan of medium-term notes and issued the first 600 million yuan at an interest rate of 3.2%, driving the 1H20 comprehensive financing cost to -0.55ppt to 4.35% year on year, balance ratio -1.68ppt to 49.89% year on year. At the same time, the company received 400 million green “anti-epidemic loans”. We believe that the company's current financial situation is stable, which is conducive to the steady progress of projects under construction. Profit forecast and valuation We maintained 2020/2021 net profit of 495/595 million yuan. The current stock price of A shares corresponds to 18.9/15.7 times the 2020/2021 price-earnings ratio. The outperforming industry rating and target price of 12.8 yuan remained unchanged, corresponding to 22.9/18.8 times the 2020/2021 price-earnings ratio, with 20% room for growth compared to the current stock price. The current stock price of Hong Kong stocks corresponds to 7.6/6.3 times the price-earnings ratio of 2020/2021, maintaining the target price of HK$8 for outperforming industry ratings, and there is room for growth of 66%. Risk The risk of impairment of accounts receivable, the risk of falling hazardous waste disposal prices, and the risk of project progress.