The incident company released its semi-annual report. 2020H1 achieved operating income of 276 million yuan, a slight increase of 0.01% over the previous year, and realized net profit of 69 million yuan, a decrease of 15.23% over the previous year. Comment 1. The aerospace business increased significantly over the same period last year, and component assembly helped the company reach a new level of development. Dekun Aviation, a wholly-owned subsidiary of the company, specializes in aerospace parts manufacturing business. Currently, its main business includes aerospace tooling design and manufacturing, aviation CNC parts precision processing, aviation sheet metal parts manufacturing, and component assembly. The products are used in civil aircraft such as Boeing, Airbus, IAI, and COMAC, various types of military aircraft, and launch vehicles. The 2020H1 aerospace business achieved revenue of 021 million yuan, an increase of 70.16% over the previous year, and the aerospace business developed rapidly. Tooling tools, precision machining, and sheet metal parts are currently the main sources of revenue for Tokun Aviation. In the future, the company's component assembly and distribution bureau in the aerospace sector will enter the harvest stage. China's domestically produced military aircraft have entered a stage of accelerated deployment, which will not only drive the development of the company's tooling, grinding tools and parts processing business, but more importantly, it will bring major opportunities for the development of the company's component business. The company will use its technical strength to achieve leapfrog development in component assembly. 2. The main business of the parent company has been greatly affected by the epidemic in the short term, and is expected to achieve steady growth throughout the year. Affected by the epidemic in the first half of the year, the revenue of the powder system and supporting equipment manufacturing business fell 3.22% year on year. Among them, roller systems (subsystems) fell by 31.93%, which had a significant impact on overall revenue, mainly because the following customers were affected by the epidemic and the delay in resuming work and production led to a decrease in demand. As the domestic epidemic is effectively controlled, the parent company's main business is expected to improve markedly in the second half of the year, and is expected to achieve steady growth throughout the year. 3. Profit forecast and investment suggestions: The company is expected to achieve operating income of 9.23/12.57/1,776 billion yuan in 2020/21/22, net profit of 2.62/3.94/625 billion yuan respectively, EPS of 0.26/0.39/0.61 yuan, corresponding PE of 35/23/15 times, giving the company 38 times reasonable PE, corresponding to the target price of 14.82 yuan for 2021. Given that the current accelerated release of domestic military aircraft and future mass production of large domestic aircraft will drive the rapid development of the aviation parts processing and component assembly market, the company is expected to fully benefit, cover for the first time, and give it a “buy” rating. 4. Risk warning: risk of delays in military revenue recognition; powder systems and supporting equipment growth falls short of expectations; profit and valuation judgments fall short of expectations