Event: the company reported semi-annual report that the income in the first half of 2022 was 431 million yuan, an increase of 29.86% over the same period last year; the net profit was 54.6371 million yuan, an increase of-16.47% over the same period last year; and the net profit after deducting non-return was increased by-6.09%.

2022Q2 performance is in line with expectations, operating net cash flow has improved significantly. According to the company's semi-annual report, Q2 achieved an income of 203 million yuan in a single quarter, an increase of 12.18% over the same period last year, a net profit of 22 million yuan, an increase of-38.46% over the same period last year, and a net profit of 24 million yuan, an increase of-23.90% over the same period last year. Q2 single-quarter gross profit margin was 48.10%, the highest since 2021; affected by credit impairment losses and increased financial expenses, the net sales profit rate was 11.02%, down 8.85 percentage points from the same period last year and 3.35 percentage points from the previous year. In the first half of the year, the net operating cash flow was 41 million yuan, an increase of 141.82% over the same period last year; inventory was 295 million yuan, an increase of 55.26% over the same period last year; and contract liabilities were 34 million yuan, an increase of 112.50% over the same period last year.

The shock absorption and isolation industry is a sunrise industry with more than 10 times market space, and the company's expansion against the market fully demonstrates its confidence. Compared with the traditional seismic technology and products, seismic reduction and isolation has obvious advantages. after the landmark policy "regulations on Seismic Management of Construction projects", the industry has developed from quantitative change to qualitative change, and the area covered by mandatory policy has been greatly expanded. and the seismic reduction and isolation paradigm of Yunnan Province has been gradually promoted to the whole country. According to our estimates, the market space of the seismic isolation industry will reach 23.605 billion yuan by 2025, an increase of more than 10 times compared with 2021. The company plans to issue shares to the Wells Fargo Fund to raise 250 million yuan for capacity expansion, which fully demonstrates confidence in the industry and the company against the market expansion.

Standard setting + technology leadership + capacity expansion + supply overall solution, the company's leading position is more prominent. 1) Standard makers and guides: the company has promoted the formulation of a number of local and national standards by virtue of its leading position in the industry, and its own product standards are higher than the national standards, with the further promotion and application of seismic isolation technology, the national standards of seismic isolation products are expected to be further improved, and the company has a greater first-mover advantage. 2) Industry pioneer and leader: the company's senior academician Zhou Fulin is a leader in the shock reduction and isolation industry, contributing to the development of China's shock isolation industry. The academician Zhou Fulin workstation set up by the company has strong R & D capability and high level of product manufacturing technology. in the past two years, the proportion of R & D personnel is more than 15%, and the proportion of R & D investment continues to increase. 3) provide the overall solution: due to the non-standardization of products and customization of services in the shock absorption and isolation industry, and the lack of professionals in the design and construction units, the company puts forward higher requirements to the manufacturers, and the company has the overall solution supply capacity that is scarce in the industry. 4) the national promotion of Yunnan experience: due to its geographical reasons, Yunnan is the birthplace of the technology and standards of China's shock reduction and isolation industry. The company started in Yunnan and ploughed Yunnan, with unique location advantages, and with the landing of the policy and the promotion of the industry, the case and experience of Yunnan are being popularized to the whole country. 5) full orders: the company's IPO and convertible bond raising projects will add a total of 110,000 sets of shock isolation products per year. As of April 25, 2022, the company's main orders-on-hand and intended orders totaled 946 million yuan (including tax), accounting for 141.07% of the company's revenue in 2021. Full production capacity and orders provide sufficient impetus for high performance growth.

Profit forecast and investment rating: we maintain the estimated net profit from 2022 to 2024 of RMB 1.98 million, corresponding to the PE of 74, 39 and 23 times, and maintain the "buy" rating.

Risk hints: the permeability of the shock absorption and isolation industry is not up to expectation, and the operating risk is increased under the impact of the epidemic, etc.