Event: The company released its 2020 semi-annual report. In 20201H, the company achieved revenue of 972 million yuan, down 15.48% year on year; comprehensive gross margin reached 30.78 percent, up 11.26 percentage points year on year; period expense ratio 11.18 percent, up 1.16 percentage points year on year; current ROE 5.91%, up 2.53 percentage points year on year; and achieved EPS of 0.14 yuan, nearly doubling year on year. The company took the initiative to reduce non-core business, which led to a year-on-year decrease in revenue in the first half of the year. In 20201H, the company achieved revenue of 972 million yuan, a year-on-year decrease of 15.48%. The decline in revenue was due to the company's active contraction of pea trading business, while core businesses such as pea protein, dietary fiber, and fans grew well during the same period. Pea protein revenue growth has accelerated, and demand in overseas markets has stabilized. In the first half of 2020, the company's pea protein revenue was 368 million yuan, an increase of 14.29% over the previous year, and the growth rate was 4.39 percentage points higher than in 2019. In the same period, the revenue scale of overseas markets was 409 million yuan, up 11.14% year on year, and the growth rate was 3.54 percentage points higher than in 2019. The company's pea protein is basically used for export, so the scale and growth of pea protein business is basically in line with overseas markets. In the first half of 2020, the company's accounts receivable turnover ratio increased by 2.16 percentage points year-on-year, reaching the highest level since 2016, indicating that the repayment speed of customers (especially overseas customers) is increasing, and the company's overall sales efficiency is also improving. The rise of the plant-based meat market has brought pea protein into a broad downstream application space, and the company has achieved technological sublimation and business transformation as a result. Mei Meat is currently the largest plant-based meat supplier in the world. It has the most mature product technology, and is also the company's core major customer, so we have also paid attention to Mei Meat's growth since this year. In the first half of the year, Mei Mei Mei's sales in the global market grew rapidly. The catering channel in the second quarter was only slightly affected, which did not affect the overall growth of meat products. Meiniku's net sales in the first half of the year increased 96% year on year, with 69% increase in the second quarter; gross profit for the first half of the year increased 113% year on year, with 48% increase in the second quarter. In the second quarter, due to the pandemic, Mei Meat's sales in the catering channel increased negatively year on year, but the retail channel maintained a high growth trend: Mei Meat's sales in the retail channel increased 180% year over year in the first half of the year, of which 195% in the second quarter; and the food and beverage channel increased 15% year on year, of which -61% in the second quarter. The growth of American meat in overseas markets is basically the same as in the US market. In the first half of the year, the gross margin of American meat products increased 2.7 percentage points year-on-year to 33.9%, and the product's profit level is rising. Since this year, Meiniku's R&D expenditure has narrowed marginally, and the increase in expenses has come more from sales and marketing expenses, indicating that part of the company's core goals have switched to large-scale mass production and channel expansion. As of June 27, Mei Meat's raw materials and commodity stocks remained at a high level, with increases of 54.38% and 45.24%, respectively, compared to the end of the previous year, indicating that the company's sales expectations for the second half of the year were optimistic. We believe that the impact of the epidemic on sales of meat products is extremely limited and limited to catering channels. As the epidemic subsides, the limited negative impact will also decrease, and the development trend of the plant-based meat market will not change due to short-term reasons. Income from dietary fiber has maintained a high and steady level of growth. In the first half of 2020, the company's dietary fiber revenue was 53 million yuan, an increase of 17.78% over the previous year, maintaining a high level of growth. Dietary fiber is a derivative product of pea processing and is used in health products and food. Currently, the company's dietary fiber is mainly for export markets. The growth in fan revenue fell to single digits. The company's fan business targets the domestic market. In the first half of 2020, the company's fan revenue was 223 million yuan, an increase of 7.73% over the previous year. The growth rate fell to single digits, but the business is still growing. Fans are the company's traditional business, but the added value is low, the market is saturated, and product growth is weak, so the profit weight of the fan business continues to decline. Currently, there are only about 40 to 50 Longkou fan companies, concentrated in Shandong Province, and the fan market environment has improved compared to the past. Pea protein is currently the company's main profit contributor. In the first half of 2020, in the company's business structure, pea protein contributed 76% of gross profit, and dietary fiber and fans weighted 11% and 10% of gross profit, respectively. The cost of pea protein and dietary fiber has dropped dramatically. In the first half of the year, under the premise of revenue growth, the cost of the company's pea protein and dietary fiber dropped sharply: pea protein revenue increased by 14.29%, while the cost decreased by 5.34%; dietary fiber revenue increased 17.78%, and the cost decreased by 11.11%. There are two reasons for the decline in core business costs in the first half of the year: First, the scale of production and revenue increased, capacity utilization increased, and production costs were diluted. According to research, the company's pea protein production reached 60,000 tons in the first half of the year, and the capacity utilization rate reached 85.71%, a further increase over the previous year. Second, the prices of major raw materials and energy have declined, which has contributed to a year-on-year reduction in costs. In the second half of 2019, the import price of peas was in a relatively low position, so the company's pea reserve price for 6 months was relatively low. Driven by falling costs, the gross margin of the company's pea protein rose 7.05 percentage points to 66.38 percent in the first half of the year; the gross margin of dietary fiber increased 10.44 percent to 69.19 percent. Both have reached their highest levels since 2016. We believe that there is still room for improvement in the company's capacity utilization, so costs are still driving down. In the first half of the year, the company's expenses were reduced by a certain margin over the same period last year due to the pandemic. In the first half of the year, the company's logistics expenses decreased by 2.87% year on year; publicity expenses decreased by 42.49% year on year. The above reduction in sales expenses is related to the domestic epidemic. A brief “shock” in marketing activity has led to a phased reduction in various expenses, which is not sustainable. According to research, the company's logistics for overseas markets were basically normal in the first half of the year, and were not greatly affected by the epidemic. In the first half of the year, the company's R&D expenditure rate reached 3.89%, an increase of 2.16 percentage points over the previous year. In the first half of the year, when the cost rate was generally reduced, the company still guaranteed investment in R&D. Investment ratings We expect the company's EPS for 2020, 2021, and 2022 to be 0.26, 0.4, and 0.56 yuan respectively, up 60%, 53.85%, and 40% year-on-year respectively. Referring to the closing price of 16.42 yuan on September 8, and the corresponding PEG values of 1.1 times, 0.8 times, and 0.76 times, we maintain the company's “buy” rating, and the target price for the company's stock price within 6 months is 18.88 yuan. Risk warning: exchange rate fluctuations increase fluctuations in company performance; potential risks such as production safety; there are certain natural risks in overseas pea cultivation.