EPS in the first half of the year was 0.18 yuan, which was lower than expected. The main reason for the decline in the company's performance is that the epidemic led to the shutdown of upstream and downstream enterprises, and the decline in the price of resource products led to a decline in the overall gross profit margin. With the gradual elimination of the impact of the epidemic, the company's capacity utilization is expected to gradually pick up, and abundant project reserves provide a guarantee for future performance growth. Lower the 2020 net profit forecast to 448 million yuan, maintain the 2021-2022 net profit forecast of 6.20 / 716 million yuan, and maintain the "hold" rating.

The performance of 1H2020 is 0.18 yuan, which is lower than expected. The company's 1H2020 realized operating income of 1.479 billion yuan, down 12.5% from the same period last year; the net profit from home was 161 million yuan, down 36.4% from the same period last year; and the basic EPS was 0.18 yuan, which was lower than expected. From a quarterly point of view, the company's 2Q2020 achieved operating income of 821 million yuan, a decrease of 7.0% over the same period last year, and a net profit of 105 million yuan, a decrease of 27.3% over the same period last year. The basic EPS is 0.12 yuan.

The epidemic suppressed the performance of H1, and the gross profit margin decreased slightly. Affected by the epidemic, upstream and downstream enterprises stopped work and reduced production, the demand for hazardous waste disposal decreased, and the demand for resource-based products and price levels declined, resulting in a 14.9% drop in revenue from the same period last year. The decline in the price of recycled products led to a drop in the gross profit margin of the hazardous waste recycling business by 3.7pcts to 23.2%, driving the overall gross profit margin of the company down 3.6pcts. During the period, the overall expense rate remained stable, with the management expense rate rising 2.0pcts to 14.7% compared with the same period last year. In terms of debt level, the company's asset-liability ratio is 49.9%, down 1.7pcts from the end of last year, and the financial position remains sound.

Capacity utilization is about to pick up, and the project reserves are abundant to ensure future performance. Q2 revenue and net profit improved significantly compared with the previous month. With the improvement of the degree of return to work and production in upstream and downstream enterprises, the capacity utilization rate of the company's operational projects is expected to gradually pick up, leading to the improvement of the company's performance. As of 1H2020, the company has 7 projects under construction and proposed, with a total design qualification of 5175,000t / a, including 175000t / a for resource utilization and 342000 t / a for harmless disposal. Abundant project reserves help to increase the flexibility of performance, and the long-term growth trend of performance remains unchanged.

The epidemic situation increases the concern of medical waste, and the concentration of the industry is expected to increase. Affected by the epidemic situation of COVID-19, the attention of the medical waste and hazardous waste disposal industry has increased. The promulgation of documents such as the work Plan for Comprehensive treatment of wastes from Medical institutions and the National three-year Action Plan for Special rectification of production Safety will accelerate the standardization process of the hazardous waste disposal industry, and the backward production capacity will be cleared gradually, and the concentration of the industry will continue to improve. The company has obvious advantages in business qualification, location layout and fine management, and is expected to further expand its market share.

Risk factors: macroeconomic fluctuations, repeated epidemic situation caused the company's industrial waste business volume and gross profit margin to change more than expected; the project production progress is slower than expected.

Investment suggestion: taking into account the impact of the epidemic, we lowered the company's 2020 return net profit forecast to 448 million yuan (originally 529 million yuan), maintaining the 2021-2022 return net profit forecast of 620 million yuan, and the current stock price corresponding to Pamp E is 21-15-13 times. Maintain the "hold" rating.