Guangri Co., Ltd. announced the interim report: Revenue for the first half of the year was 2,792 billion yuan, up 12.59% year on year; net profit was 284 million yuan, up 100.44% year on year; the company expects net profit achieved in the first three quarters of 2019 to increase significantly compared to the same period last year. Net profit is expected to rise back to 420 million yuan and 550 million yuan in 19/20, corresponding to PE in 19/20, 17.6 times and 14.7 times, maintaining the “Prudent Recommendation - A” rating. Net profit growth was much higher than revenue because Hitachi's investment income increased by 170%. Hitachi's investment revenue for the first half of the year was 238 million yuan (up 170% year on year), of which revenue for the second quarter was 126 million. Research shows that the shipping situation is very intense (the main pressure is insufficient installation manpower). However, in the first half of '18, due to real estate policy regulation and steel prices remaining high, the net profit base for the same period was small (142 million), so the performance of the first half of '19 was a significant year-on-year increase. Gross margin continued to be sluggish, and net interest rates rebounded sharply. The elevator industry has now entered a period of industrial maturity. Competition in the industry is more intense and competition for homogenization is serious. Elevator production increased rapidly in the first half of the year, but steel prices are still high, and as the price of imported iron ore continues to rise, there is still a risk of price increases in the future, and the company's gross margin continues to be sluggish. The overall gross margin for the first half of the year was 14.08% (14.27% in the same period last year), a relative decline. The net interest rate rebounded sharply, mainly due to the large increase in net profit (Hitachi investment income). Net interest rate for the first half of the year was 10.17%, an increase of 4.44 pct over the same period last year. Three fees were controlled, operating cash flow declined, and accounts receivable accounted for a large share of revenue but a healthy account age structure: ① The sales expense ratio for the first half of the year was 2.89% (-0.4pct), mainly due to a decrease in sales service fees of about 4.4 million yuan over the same period; the management expense ratio was 10.67% (-0.6pct), mainly due to a year-on-year decrease in labor costs; financial expenses increased by about 8.3 million, mainly due to a decline in interest-bearing capital, interest income decreased by about 4.5 million yuan. Due to increased bank loans, interest expenses increased by about 1.8 million yuan. ② Net operating cash flow decreased by about 54 million yuan, mainly due to an increase in raw material procurement costs and a 23.68% year-on-year increase in total inventory. The company's financial capital on account was 2.36 billion yuan, which is quite abundant. ③ Accounts receivable for the first half of the year increased by 25.90% compared to the end of last year, accounting for 51.54% of revenue, accounting for a relatively large share, but accounts for less than one year, accounting for 93.19%, and the structure is healthy. At the same time, the company began to strengthen the collection of notes receivable. The number of notes receivable decreased by 45.77% compared to the end of last year. The overall receivables risk is not significant. Subsidiaries are actively expanding their business, and R&D is being carried out simultaneously. In the first half of the year, Guangri Electric successfully promoted Hitachi elevator stainless steel S door covers, low-smoke halogen-free wires and cables, TX safety devices, etc.; Guangri Elevator promoted testing of air conditioning projects to achieve batch supply; developed new orders such as Zhongshan Fubi and Zhuomeni cables; at the same time, strengthened cooperation and negotiations with key customers such as Suzhou Kangli Elevator and Otis to seek wire and cable, sheet metal, and transformer businesses. By actively expanding downstream business, Guangri Co., Ltd. ensures the company's continued healthy and diversified long-term operation. At the same time, R&D efforts have been maintained. Projects such as Hitachi Elevator's “High-efficiency and Energy-Efficient Small Computer Room Elevator Technology Renovation Project” have all received good feedback. In the first half of the year, the company's R&D expenses were 117 million yuan, an increase of 31.49% over the previous year, accounting for 4.19% of revenue. Maintain a “Prudent Recommendation - A” rating. The company's business includes elevator assembly manufacturing, sales and engineering services, elevator parts manufacturing and logistics distribution services, covering the entire elevator industry chain. Currently, elevators are the core product, and the upstream and downstream industrial chain continues to expand. Driven by the three factors of “the arrival of the elevator renewal cycle, the installation of new elevators in old houses, and the expected inflection point of completion”, we believe that the company's performance in '19 is expected to stop its decline and improve. It is expected that net profit from the mother in 19/20 will rise to 220 million and 500 million, corresponding to the PE of 19/20, 17.6 times and 14.7 times, maintaining the “Prudent Recommendation - A” rating. Risk warning: prices are falling too fast, real estate investment growth is falling more than expected, raw material prices fluctuate