Event: the company released its semi-annual report for 2020, with an operating income of 961 million yuan, an increase of 36.11% over the same period last year, a net profit of 131 million yuan, an increase of 28.27% over the same period last year, and a deduction of 128 million yuan from non-net profit, an increase of 44.83% over the same period last year.

2020H1's performance exceeded market expectations and cash flow continued to improve.

(1) the company's revenue grew rapidly in the first half of the year. 2020H1 achieved revenue of 962 million yuan, an increase of 36.11% over the same period last year, mainly due to a large increase in revenue from both special equipment and IDC business. The net profit from home was 131 million yuan, an increase of 28.27% over the same period last year. The main reason why the growth rate was lower than the revenue growth rate was that the company donated 3 million yuan to the Hubei Red Cross Society for COVID-19 epidemic prevention and control in the first half of the year, and deducted non-net profit of 128 million yuan, an increase of 44.83% over the same period last year. From a sub-business point of view, the revenue of special equipment reached 519 million yuan, an increase of 23.65% over the same period last year, mainly due to the increase of 136 million yuan from the new mask machine; the revenue from IDC integrated services reached 442 million yuan, an increase of 54.41% over the same period last year, mainly due to the strong demand for online network under the epidemic, and the income and share of the only major network customers increased significantly.

(2) the ability of cost management and control of the company is obviously improved. The sales expense rate, management expense rate and financial expense rate of 2020H1 Company were 1.43%, 4.48% and 0.27% respectively, which decreased by 1.16pct, 0.45pct and 0.07pct respectively compared with the same period last year. At the same time, the company invested 48.0546 million yuan in research and development in the first half of the year, an increase of 76.07% over the same period last year, mainly due to the company's increased investment in product research and development and a substantial increase in bandwidth, cabinet sales, and the number of nodes, laying a solid foundation for the rapid development of the business.

(3) Cash flow continues to improve and newly signed orders are growing rapidly. The net cash flow generated by 2020H1's operating activities was 217 million yuan, an increase of 65.99% over the same period last year, mainly due to increased revenue and increased cash received from the sale of goods. In the first half of the year, contract liabilities increased by 43.684 million yuan, or 254.14%, compared with the beginning of the period. this was mainly due to the increase in deposit received from customers and the rapid growth of new orders signed by the company, which injected momentum into the company's future performance growth.

The rapid recovery of the furniture manufacturing market is expected to thicken the company's performance. After the domestic epidemic, the market prosperity of commercial housing sales and furniture manufacturing industry is picking up rapidly; from January to March 2020, the sales area of commercial housing was 220 million yuan, a year-on-year decline of 26.30%. The rate of decline in April narrowed significantly (down 2.14% from the same period last year), and the growth rate changed from positive to negative from May to July, with a monthly growth rate of 9.47% in July. At the same time, the furniture manufacturing industry achieved 335.22 billion yuan in revenue from January to July 2020, down 13.10pct from the same period last year, significantly narrowing from the 23.70% decline in the first quarter, of which the monthly decline in July has shrunk to 4.5%. The recovery of manufacturing led to the upgrading of the production capacity of downstream furniture companies, and the company's equipment sales resumed; in the first half of 2020, the company's automatic edge sealing machine realized revenue of 172 million yuan, an increase of 0.29% over the same period last year, and a gross profit margin of 29.40%, down 2.17% from the same period last year; revenue of CNC cutting board saw reached 61 million yuan, down 14.13% from the same period last year, and gross profit margin was 30.36%, down 1.85% from the same period last year. We believe that the company's furniture machinery business in the industry downturn still maintain a micro-growth trend, with strong resilience. With the warming of furniture prosperity and the further improvement of the demand for intelligent equipment in the industry, the company, as the leader in domestic panel furniture production equipment, furniture machinery revenue is expected to further increase.

Continue to expand the layout of the IDC industry, the only network performance in the future high growth can be expected. IDC industry is the core basic service of new business models such as "Internet +", intelligent manufacturing and "industry 4. 0". The construction of "new infrastructure" is expected to continue to promote the national one-network integration process, promote the development of 5G and data center business, and then contribute to the rapid development of the IDC industry. The company mainly uses the mode of renting computer rooms of operators, and has the "only cloud" public cloud service platform independently developed by OpenStack, while the cloud platform has won the honors of "Dongguan Top Ten Cloud Computing demonstration projects" and "Dongguan Industrial Cloud platform". As of June 2020, the only data center node whose network has been established and operated covers 36 prefectures and cities in 18 provinces and some overseas areas. In the first half of 2020, the company plans to invest 640 million yuan in the construction of Nanxing Shatian green industrial cloud data industry base and industrial Internet and data center R & D project. The project plans to invest 5000 4KW standard cabinets, and the project expects IRR (after tax) to be 15.18%. Further expand the industrial layout of IDC. In the first half of 2020, the company's IDC integrated services achieved revenue of 442 million yuan, an increase of 54.41% over the same period last year, with a gross profit margin of 22.83%, a decrease of 4.64% over the same period last year. We believe that as the only network continues to plan and improve the node layout of the data center, we will promote cloud computing applications, cloud-network-edge convergence and information security capacity building to meet the growing data computing and interaction needs in the future. the performance of the only network is expected to continue to grow rapidly.

Maintain a "buy" rating. The company has formed a double main business pattern of furniture machinery + IDC business, forming a synergy effect, all of which have room for growth. At present, the market prosperity of the furniture manufacturing industry is picking up rapidly, and the superimposed company continues to expand the layout of the IDC industry, and the company's future performance is expected to be high. We estimate that the return net profit of the company from 2020 to 2022 is 2.57,3.52 and 445 million yuan respectively. Using PE model and EV/EBIT model respectively, we can get the long-term reasonable market value of the company is expected to exceed 12 billion yuan, compared with the current market value of the company, there is still much room for improvement; maintain the "buy" rating.

Risk hint: the growth of furniture machinery industry is not as expected, the competition in IDC industry is becoming increasingly fierce, the coordination of the company's furniture machinery business and the only network business is not as expected, the risk of accounts receivable recovery, the risk of valuation and so on.