Event: the company announced that 1H23 achieved operating income of 561 million yuan, down 9.66% from the same period last year, and net profit of 455 million yuan, down 12.92% from the same period last year.

The investment income and management fee income of private equity business have declined in the short term, and the follow-up income is expected to be further released with the orderly expansion of project management and direct investment.

(1) in terms of follow-up investment income, 1H23 achieved an investment income of 293 million yuan, down 47.95% from the same period last year. Among them, the investment income of Harmony Jinyu was-21 million yuan, down 51 million yuan from the same period last year, and the investment income of Harmony Jinhong was 326 million yuan, an increase of 2.52% over the same period last year.

(2) in terms of management fee income, the income of 1H23's private equity business segment was 122 million yuan, down 16.08% from the same period last year. The expected decline in management fee income is mainly due to the gradual withdrawal of the company's first phase of managed funds, resulting in a decline in the scale of private equity fund management. On the revenue side, the harmonious Green Fund, the second phase of the company's products, will be gradually subscribed in 2023, and the future expansion of the fund under management is expected to re-increase the company's management fee income; on the cost side, the operating cost of 1H23's private equity business has significantly decreased by 82.01% compared with the same period last year, and the gross profit margin has increased slightly by 0.9%. The sales expenses and management expenses of subsidiaries have been effectively controlled.

(3) in terms of excess performance compensation, 1H23 Company's excess performance compensation is 1.128 billion yuan, but due to the possibility of downward fluctuations in the fair value of Harmony Jinhong and Harmony Jinyu investment portfolio, accounting prudence has not yet begun to be calculated. If 1H23 provides for all excess performance compensation, the corresponding return net profit is 1.583 billion yuan.

Affected by the weak demand side of the building materials industry and intensified competition at the supply side, the company's building materials production performance declined slightly. The building materials business division of 1H23 achieved an operating income of 439 million yuan, down 7.69% from the same period last year. Mainly due to the impact of the holiday period and environmental control in the first quarter, the progress of downstream projects is slow, the overall demand of the building materials industry is weak, and the situation improved in the second quarter. In addition, the competitors' low-price strategy and the downward cement market in the surrounding areas of southern Sichuan put pressure on the company's cement prices. It is expected that with the gradual landing of the package of stable economic policies, the acceleration of China's economic recovery and the acceleration of urban construction projects to resume production, the company is expected to rely on the leading advantages and three-dimensional product matrix strategy in the business area to achieve a rebound in building materials production performance.

We estimate that the EPS for 2023-2025 will be 2.00 EPS 2.54 peg 3.22 respectively, which is based on the closing price on September 4, 2023, and is expected to correspond to 8.61 times 2023PE, maintaining the "buy" rating.

Risk hints: the investment returns of funds and direct investment projects are lower than expected, market competition intensifies, regulatory policies become stricter, and project listing and withdrawal slows down.