Event: the company released its semi-annual report for 2020, with operating income of 8.788 billion yuan in the first half of the year, an increase of 13.08% over the same period last year, net profit of 259 million yuan, down 2.47%, and non-return net profit of 236 million yuan, down 6.86% from the same period last year. Of this total, the operating income in the second quarter was 4.562 billion yuan, an increase of 4.42% over the same period last year, and the net profit of returning home was 118 million yuan, down 16.63% from the same period last year.

The growth of business income of entrusted processing trade leads to the growth of overall income, and the decline of gross profit margin of the main profit contribution items affects the overall profit performance. In 2020, the company commissioned processing trade business to achieve an income of 6.701 billion yuan, an increase of 21.68% over the same period last year. However, affected by the new income standard adjustment required for the accounting of freight and miscellaneous charges of this business, the gross profit was 58 million yuan, a decrease of 47.16% over the same period last year. The completed delivery of railway special containers was 6537 million TEU, a decrease of 11.53 percent over the same period last year; the realized income was 670 million yuan, down 17.23 percent from the same period last year; the gross profit was 112 million yuan, down 31.38 percent from the same period last year; and the gross profit margin was 3.44 percent lower than the same period last year. The total arrival and delivery volume of the Sha-Shan railway reached 32.3144 million tons, 23.09 percent over the same period last year; the income realized was 1.272 billion yuan, an increase of 9.70 percent over the same period last year; the gross profit was 242 million yuan, an increase of 15.68 percent over the same period last year; and the gross profit margin increased by 0.99 percent over the same period last year. The company's gross profit margin fell 1.98 percentage points to 5.01% in the first half of the year.

The growth of medium-and long-term railway special container business is still expected, which will become an important driving force for the company's performance. Looking back, the railway special container business will still support the company's performance growth. at present, the railway special containers operated by the company mainly include all kinds of dry bulk containers, all kinds of tank containers, refrigerated containers, steel coil containers, etc., with a variety of box structures. and in 2019, the company increased R & D expenditure of 2 million yuan for the research and development of new box business. We believe that container multimodal transport will continue to develop.

Investment advice: the company is relatively less affected by the epidemic and is optimistic about the growth of special box business and the opportunities brought about by railway reform. It is estimated that from 2020 to 2022, the EPS is 0.38, 0.42 and 0.45 yuan, respectively, and the corresponding PE is 16, 14 and 13x, respectively, maintaining the "over-holding" rating.

Risk hint: the development of the epidemic is higher than expected, the public transportation is not as expected, and the freight rate falls sharply.