Events:

The company released its semi-annual report for 2020 on the evening of August 26, with operating income of 841 million yuan in the first half of the year, an increase of 93.56 percent over the same period last year, net profit of 41.3205 million yuan, up 20.99 percent, and non-net profit of 29.6754 million yuan, an increase of 29.82 percent.

Comments:

The acquisition of Hangzhou is becoming more and more effective, and the company's business chain is expanding strongly. In the first half of the year, Hangshi shares achieved revenue of 201 million yuan and net profit of 21.7248 million yuan, contributing more than 50% of the company's net profit. The successful acquisition of Hangshi shares effectively promoted the growth of the company's performance and the extension of the business sector. The core technology of Hangshi shares in the fields of gas and thermal power, municipal engineering and construction engineering design and general contracting cooperates with the company's existing business resources, which forms a necessary supplement for the company to improve its comprehensive service capacity and realizes the strong expansion of the company's business chain.

In the first year of great-leap-forward development of prefabricated buildings, environmental protection EPC ushered in a new opportunity. The company actively responds to the national policy and gives full play to its advantages in the industrial sector. In the first half of the year, it has undertaken many projects such as PC deepening design in the International Zone of the Asian Games Village. In the first half of the year, the company realized 472 million yuan in revenue from the EPC project general contracting section, an increase of 128.70% over the same period last year. The implementation of the strictest solid waste Law in history on September 1 will create a large number of engineering EPC demand and provide a large number of high-quality orders for the entire industry, and the company's environmental protection EPC engineering business is expected to expand. At present, the company invested in the southern solid waste resource utilization project and other 8 projects have all won the bid, with a total contract of 270 million yuan, laying a good foundation for follow-up performance growth. With the continuous release of assembly building dividend, the company's assembly design and EPC project general contracting business two-way coordination, continue to contribute to revenue and performance.

With the continuous promotion of the transformation of old residential areas, the advantages of the company have become more prominent. In 2020, the Hangzhou Municipal Party Committee made it clear that it plans to renovate 300 residential areas for the whole year, with a total construction area of more than 12 million square meters. In the first half of the year, the company has undertaken a number of Hangzhou old residential reconstruction and upgrading projects, with a total construction area of about 1 million square meters. The company is based in Zhejiang, the business plate covers East China, forming a good location synergy effect, and the market penetration is constantly improving.

Taking into account the quarter-on-quarter improvement in operations in the second half of the year, adjust the profit forecast and maintain the company's "buy" rating.

It is estimated that the EPS of the company 2020 / 2021 / 2022 will be 0.55 yuan / 0.72 yuan / 0.93 yuan respectively.

Risk hint: the development of prefabricated buildings is not as expected, and the progress of the old reform is not as expected.