Incident: The company released its semi-annual report. 2020H1 achieved revenue of 1,317 billion yuan, a year-on-year decrease of 11.16%; realized net profit of 128 million yuan, a year-on-year decrease of 9.99%; and a year-on-year decrease of 1.91% to 118 million yuan after deduction. Q2 revenue decreased 0.64% year over year to 821 million yuan, net profit to mother increased 11.12% year over year to 99.6 million yuan, and increased 12.65% year on year to 96 million yuan after deduction. Comment: The performance was in line with expectations, and the engineering channel grew significantly in the second quarter. ① Revenue side: 2020H1 domestic/export sales changed -10.89%/-11.75% to 9.49/ 368 million yuan. Among them, Q2 domestic/export sales changed 6.58%/-18.88% year on year to 6.32/ 189 million yuan. Domestic business recovered significantly in the second quarter, but after the epidemic spread overseas in mid-late March, foreign sales were under heavy pressure. Domestic sales sub-channels were split, and the 2020H1 retail channel/engineering channel changed -16.37%/0.89% year over year to 608/341 million yuan, of which Q2 retail channels/engineering channels changed -3.32%/30.99% year over year to 408/224 million yuan. ② Profit side: Mainly benefiting from automated transformation to improve production efficiency. The 2020H1 gross margin was 32.64%, an increase of 0.76pct over the previous year. The cost ratio increased by 1.97 pct to 20.30% year on year during the 2020H1 period, and the sales/management expenses ratio changed by 0.94/+1.13 pct year on year, respectively (mainly due to the increase in advertising, depreciation, etc.). Accelerate the development of real estate customers, and the engineering channel is expected to become a new growth pole. ① The company's engineering channel uses a self-operated+regional dealer model. At present, it has reached strategic cooperation with large customers such as R&F, Poly, and Aoyuan, and new customers are expected to enter the expansion stage one after another. At the same time, large customers in the past also have room to increase their market share. Overall, the engineering channel will enter the volume stage in the next two years, which will strongly drive performance growth. ② The company's export sales in the first half of the year were under pressure due to the overseas epidemic, but sales of existing homes in the US increased 8.7% year on year in July. It is expected that the European and American housing markets will enter a recovery stage, and the company's export sales are expected to pick up sequentially. Profit forecast and valuation: Adjust the profit forecast according to the interim report, and consider the valuation switch to increase the target price. The estimated EPS for 2020-2022 will be 0.92, 1.16, and 1.42 yuan, respectively, and the corresponding PE will be 18.57X, 14.73X, and 12.06X, respectively. Maintain a “buy” rating. Risk warning: The epidemic is repeated, and the expansion of engineering channels falls short of expectations.