Event: the company announced its 2018 semi-annual report that its operating income was 1.463 billion yuan, an increase of 12.10% over the same period last year, and the net profit belonging to shareholders of listed companies was 84 million yuan, an increase of 229.46% over the same period last year. The net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 71 million yuan, an increase of 194.60% over the same period last year, which is in line with market expectations. At the same time, the company forecasts that the net profit belonging to shareholders of listed companies from January to September 2018 ranges from 120 million to 150 million. In addition, the company's profit distribution plan is to distribute a cash dividend of 1.5 yuan (including tax) for every 10 shares to all shareholders, 0 shares for bonus shares (including tax), and an increase of 5 shares for every 10 shares to all shareholders with capital accumulation fund.

The automotive aftermarket and high-end equipment manufacturing business made efforts and contributed to major revenue growth in the first half of the year. 1) the revenue of 2018H1 automotive aftermarket business reached 546 million, an increase of 27.63% over the same period last year. It was verified that the number of core stores increased significantly in the first half of the year, which led to the expansion of new auto retail business and the smooth progress of auto finance business. 2) 2018H1's high-end equipment manufacturing business achieved 149 million revenue, compared with zero revenue last year and pure incremental income. Company EPS (green surface steel clean technology) environmental protection equipment sales breakthrough, mainly due to downstream iron and steel enterprises in recent years profit improvement superimposed environmental protection regulation tightening, increased environmental protection equipment capital expenditure, and the company's technology from the United States TMW company, high technical barriers, can meet higher environmental assessment requirements, it is expected that follow-up orders are expected to continue.

With the increase of gross profit margin and the reduction of R & D expenses, the inflection point of profit in the automotive aftermarket is more certain. 1) the gross profit margin of 2018H1 automobile aftermarket business reached 11.42%, an increase of 3.01 percentage points over the same period last year, which proves that the new automobile retail business is beginning to have a scale effect, and the development of auto finance business has increased the overall gross profit margin. 2) 2018H1 R & D investment totaled 33 million yuan, down 35.24% from the same period last year, which is expected to be mainly due to the maturity of the auto Superman store management system platform and the gradual reduction of R & D personnel, which proves that the automotive aftermarket business has gradually passed the investment period. 3) although the net profit of 2018H1 Teville network technology is-38 million yuan, with the rapid increase in the scale of business income and gross profit margin in the post-market, as well as the reduction of pre-market investment, the top flow and capital strength of Ali are superimposed, and the profit inflection point of the automotive post-market business in 2018 is more certain.

BABA, Jingu and Kangzhong join hands to reap the top flow and auto parts supply chain in one fell swoop. 1) according to the announcement, BABA will contribute 1.6 billion yuan in cash and will hold about 46.97% of the equity in the joint venture company, while Tweilun will hold about 16.27%. The joint venture company will be granted the exclusive right to operate the corresponding automobile post-service categories of Taobao and Tmall. 2) Auto Superman has been ploughing for 5 years, with offline high-quality stores (more than 400 directly operated stores and more than 20,000 cooperative stores), seven major warehousing systems, mature store SaaS system and a large number of post-market service talents; Kangzhong Auto parts has a nationwide auto parts supply chain, involving more than 200 cities in nearly 30 provinces; BABA has top online traffic and strong capital support. The three advantages are highly complementary, opening up the three key links of online flow, offline stores and supply chain in the automobile market, and the new retail of domestic automobile service is absolutely established.

Give a rating of "overweight". It is expected that the traditional steel wheel business will develop steadily, and the automotive aftermarket, financial business and environmental protection equipment will grow rapidly. Based on the above key assumptions of business income and expenses, the company's operating income from 2018 to 2020 is expected to be 4.563 billion, 6.173 billion and 7.768 billion respectively, and the homed net profit is 241 million, 395 million and 588 million respectively.

Risk tips: store expansion is not up to expectations; profitability is not up to expectations; affected by cyclical fluctuations in the downstream industry.