Event: The company issued a revised semi-annual performance announcement: From January to June 2017, the net profit returned to the mother was 48.3592 million yuan to 54.4041 million yuan, an increase of 60% to 80% over the previous year; a significant increase from the 2017 quarterly report forecast (20%-50%). The reason for the increase in performance is that the automated production line produced by the company in response to the new demand of furniture companies for flexible production of customized furniture for the whole house has been recognized by the market, and the sales volume has exceeded the company's expectations. Key investment points: The rise of custom furniture, and the increase in demand for panel furniture machinery. Compared with finished furniture, custom furniture has the characteristics of high space utilization, strong individuality, and overall aesthetics, and is an inevitable product of consumption upgrading. Due to the continuous increase in penetration, the growth rate of the custom furniture segment is higher than the overall growth rate of furniture consumption. The nine custom furniture listed companies (Sophia, Hollyker, Shang Pin Home, Piano, European Home, Gold Medal Kitchen Cabinet, Jiangshan Oupai, Zhibang Co., Ltd., Wole Home) had a total revenue CAGR of 29.01% in 2014-2016. The overall growth rate of the furniture manufacturing industry during the same period was only 9.13%. Furthermore, the furniture industry has post-real estate cycle attributes, and sales lag behind real estate by about a year. The commercial housing sales boom since February 2016 has gradually been driven by demand in the furniture market this year. The revenue growth rate of the furniture manufacturing industry from February to May 2017 was 14.19%, higher than the 7.56% growth rate in the same period last year. Benefiting from the continued boom in downstream custom furniture and the impact of the post-real estate cycle, demand for panel furniture machinery and equipment is expected to continue to rise. Furthermore, in the first half of 2017, seven custom furniture companies went public, raising capital to expand production capacity. Among them, the investment amount for machinery and equipment reached 238 million yuan, accounting for 47.5% of the total investment amount. The listing and expansion of production of custom furniture companies will further increase the elasticity of demand for equipment in the short term. The gross margin of CNC board saws is leading in the industry, and machining center products are fixed in volume. The company's CNC panel saw products have outstanding advantages and are at the leading level in the industry; in 2016, the product achieved revenue of 9.03964 million yuan and gross margin of 36.46%, which is significantly higher than other domestic competitors; the main reason is that the company's CNC panel saw products have good performance, good reputation in the market, and pricing superior to other rival companies. The company actively understands the mechanical equipment needs of downstream custom furniture companies' automated production lines and accelerates the development of CNC machining center products. The R&D investment in 2016 was 18.3915 million yuan, an increase of 23.37% over the previous year, and the revenue share increased to 3.66% from 3.21% in 2015. At present, the production process has stabilized, and product sales volume continues to grow; in 2016, product launch sales achieved sales revenue of 112.284 million yuan in just one year, accounting for 22.33% of that year's operating income. Since the beginning of the year, the company has continued to increase investment in R&D in processing centers. In the future, it is optimistic about the increase in profits brought about by the release of processing center equipment and reduced costs after product maturity. The company's performance exceeded expectations, and there is plenty of room for growth in the future. In the first quarter of 2017, the company achieved operating income of 139 million yuan, an increase of 48.85% over the previous year, and net profit of 17.3252 million yuan, an increase of 71.04% over the previous year. According to the company's 2017 semi-annual performance forecast, second-quarter profit increased 54%-85% year-on-year and 79%-114% month-on-month, exceeding market expectations. The company's customized flexible automated furniture production line equipment has been recognized by the market, and it is expected that it will continue to be released in the future. For the first time, coverage gave the company an “increase in holdings” rating. The company has not yet issued an asset acquisition plan due to major asset restructuring. Based on the principle of prudence, the impact of the acquisition on the company's performance and share capital will not be considered yet. The company's net profit for 2017-2019 is estimated to be 0.93, 1.24, and 154 million yuan, corresponding to EPS of 0.85 yuan/share, 1.14 yuan/share, and 1.41 yuan/share. Based on the latest closing price of 37.49 yuan, the corresponding PE is 44, 33, and 27 times, respectively. Considering the continued boom in downstream custom furniture, the company is expected to fully benefit, and for the first time, coverage is given an “increase in holdings” rating. Risk warning: Demand in the downstream custom furniture industry is slowing down; competition in the panel furniture machinery industry is intensifying; major asset restructuring falls short of expectations.