Incident On August 25, Huida Sanitary Ware released its 2020 semi-annual report. 2020H1 achieved revenue of 1,317 billion yuan, a year-on-year decrease of 11.16%; net profit of 128 million yuan, a year-on-year decrease of 9.99%; net profit of non-retracted net profit of 118 million yuan, a year-on-year decrease of 1.91%. Among them, 2020 Q2 achieved revenue of 821 million yuan, a year-on-year decrease of 0.64%; net profit of the mother's net profit of 99.6 million yuan, an increase of 11.12% over the previous year; and net profit after deducting non-return to the mother's net profit of 96 million yuan, an increase of 12.65% over the previous year. Our analysis and judgment is that 20Q2 rebounded as scheduled, and engineering channels grew rapidly in the first half of 2020 due to the impact of the COVID-19 pandemic, but the company quickly resumed work and production, assisted the construction of Huoshenshan and Xiaotangshan hospitals, reduced the adverse impact of the epidemic on the company by implementing brand strategies, active marketing, promoting project construction, and optimizing internal management, etc., and the second-quarter performance rebounded as scheduled. 2020H1 achieved revenue of 1,317 billion yuan, a year-on-year decrease of 11.16%; net profit was 128 million yuan, a year-on-year decrease of 9.99%. Among them, 2020 Q2 achieved revenue of 821 million yuan, a year-on-year decrease of 0.64%; net profit of the mother was 99.6 million yuan, an increase of 11.12% over the previous year. By region, 2020H1's domestic sales revenue was 949 million yuan, down 10.89% year on year. Among them, 2020 Q2 increased 6.58% year on year to 632 million yuan; 2020H1's export revenue was 368 million yuan, down 11.75% year on year, of which 2020 Q2 fell 18.88% year on year to 188 million yuan. Domestic sales improved markedly in the second quarter, and the outbreak of the overseas epidemic in the second quarter put pressure on export sales. However, by promoting existing customers and using online resources to develop new businesses, the company stabilizes sales, expands channels, and steadily develops international business. As of the end of June 2020, the company has obtained 15 product, packaging and accessories related certifications and 3 engineering certifications from the United States, Canada and Europe. By channel, 2020H1's domestic sales and retail channel revenue was 608 million yuan, down 16.27% year on year. Among them, 2020 Q2 fell 3.32% year on year to 408 million yuan. As of the end of June 2020, the company had a total of 2,831 domestic stores, with a total area of 484,800 square meters, including 1,799 “Huida” brand bathroom products stores, with a total area of 332,400 square meters; 396 “Huida” brand tile product stores, with a total area of 91,300 square meters; and 636 “Dufini” brand stores, with a total area of 611,000 square meters. 2020 H1's domestic sales engineering channel revenue was 341 million yuan, up 0.89% year on year, of which 2020 Q2 increased 30.99% year on year to 224 million yuan. At present, the company has reached strategic cooperation with well-known real estate companies such as R&F Real Estate, Poly Development Holdings, Kangqiao Real Estate, Aoyuan Group, Wanda Group, Ocean Holdings, Capital Real Estate, and Zhongang Real Estate. In addition, the company signed cooperation agreements with construction and real estate industry enterprises such as Jiangsu Jinma Transportation and Xinjiang Huayuan Holdings, and officially launched the Huida Sanitary Ware New Infrastructure Industry Alliance to help build a cooperation platform for the common interests of upstream and downstream industries and launch a comprehensive range of strategic cooperation through multiple channels. There was an increase in gross margin, and a slight increase in the cost ratio for the period. In terms of profitability, the gross sales margin of 2020H1 company was 32.64%, up 0.76pct year on year; net profit margin was 9.88%, down 0.30pct year on year. Among them, the gross sales margins for 2020Q1 and 2020Q2 were 29.31% and 34.65%, respectively; the net profit margins of 2020Q1 and 2020Q2 were 5.41% and 12.58%, respectively. In terms of period expenses, the 2020H1 company's period fee rate was 20.30%, an increase of 1.98 pct over the previous year. Among them, the sales expense ratio increased by 0.94pct to 9.76% year on year; the management expense ratio increased 1.62pct to 10.64% year on year, mainly due to increased remuneration, increased depreciation of fixed assets, and increased insurance premiums; and the financial expenses rate fell 0.58pct to -0.10% year on year, mainly due to increased exchange earnings and lower loan interest rates by banks. Investment suggestions: We expect Huida Sanitary Ware's operating income in 2020-2021 to be 33.92 billion yuan and 4.114 billion yuan respectively, up 5.68% and 21.26% year on year; net profit of net profit is 3.54 million yuan and 432 million yuan, up 7.63% and 22.03% year on year, corresponding to the latest PE of 16.9x and 13.9x respectively, maintaining the “increased holding” rating. Risk factors: The impact of the overseas epidemic exceeds expectations; real estate sales continue to decline; orders fall short of expectations, etc.