Incident: The company released its 2020 semi-annual report. 2020H1 achieved operating income of 406 million yuan, an increase of 7.71% over the previous year; Guimu's net profit was 32 million yuan, a year-on-year decrease of 21.37%.

2. The overall increase in Q2 performance turned a loss into a profit, and HVDC orders for communication base stations and data centers boosted the impetus for performance growth: Affected by the epidemic, 2020 Q1 revenue fell 66.8% year on year, and Guimu's net profit fell 312.6% year on year. The company caught up in the second quarter. Revenue increased 90.7% year on year, and Guimu's net profit increased 95.5% year on year. By business, the sharp increase in HVDC orders for communication base stations and data centers boosted the company's performance growth in the second half of the year.

3. Rising procurement costs and market competition lowering the overall gross margin level: 2020Q1 as a whole fell sharply due to the impact of the epidemic. As the number of Q2 orders increased, the revenue situation improved, but due to the impact of the epidemic, material procurement costs rose, leading to an increase in operating costs, and gross margin was still lower than the same period in history.

4. The three costs remained stable, with continued investment in R&D around 5G, HVDC, and charging stations; 5. In 2020, preparations were increased to gradually overcome the impact of the epidemic. The overall performance trend was optimistic: operating income during the reporting period increased compared to the same period last year, and the company's accounts receivable rose to 960 million yuan, an increase of 28.34% over 748 million yuan in the same period last year. In terms of inventory, due to the impact of the epidemic in the first quarter, there was a certain decline in the company's sales, which led to an inventory backlog. With the gradual easing of the epidemic and the gradual recovery of consumption, the company's order volume began to increase. In order to adapt to the rise in demand, the company increased inventory.

5. The first Panamanian power system was successfully delivered, and Ningde Zhishang is expected to be delivered within the year6. Investment suggestions: According to the company's future layout and order situation in various fields such as 5G, IDC, and new energy charging stations, we will maintain the company's net profit of 140 million yuan and 190 million yuan in 2020-2021, and the estimated net profit to the mother in 2022 is 240 million yuan. The corresponding current PE price is 57/44/34 times, respectively, maintaining the “increase in holdings” rating.

6. Risk warning: risk of changes in the macroeconomic environment; continued impact of the epidemic on business development; risk of technology product development and market competition; HVDC demand falls short of expected risks; base station power supply business accounts for less than expected risks; systemic risks.