It covered Huafang shares for the first time and increased its ratings. The market is concerned about the traditional market prospects of the printing and dyeing industry and believes that the company's transformation path is not easy, but we think 2015 will be an important inflection point in the company's performance. The launch of new production capacity for high-margin wax-printed cloth products and the reversal of the home textile business will bring performance flexibility. At the same time, the military goods business that the company has actively deployed over the years is also expected to benefit from the market-based reform of military materials procurement (integration of military and civilian forces), providing plenty of room for imagination. However, the equity issues that have plagued the company for many years have been straightened out, and the company's internal vitality will be stimulated. Without considering the contribution to military performance, we expect the company's EPS for 2014/15 to be 0.06/0.15 yuan. Considering the company's small market capitalization and its performance inflection point, reference industry valuation gave 55 times PE in 2015, with a target price of 8.2 yuan, increasing holdings.

Profits from the main printing and dyeing business recovered, and the military goods and home textile business helped increase performance. 1) The company's printing and dyeing technology level is leading domestically, and its products are mainly exported. As the European and American economies recover, it is expected that the growth rate of the company's export business will return to normal. At the same time, in mid-2015, the company's high-margin wax-printing cloth upgrade project will be put into operation, which will improve the company's printing and dyeing product structure, increase the company's overall profit level and enhance performance; 2) The company's home textile business is expected to reverse losses and get on the right track in 2015 as its overseas channel providers expand and the O2O layout of the domestic market is implemented; 3) As the military and civilian integration and military materials procurement reform progresses, we expect the procurement system of the General Logistics Department to become more marketable in the future, and the military goods that the company has actively deployed over the years is expected to achieve breakthroughs and open up space for future growth.

When equity is rationalized and dividends are released, management and operating vitality will be shown. Binyin Group has transferred the company's shares free of charge to the Binzhou State-owned Company, and the Binzhou State-owned Company has become the company's largest shareholder. The equity issues that have plagued the company for many years have been resolved. As an important target for the reform of state-owned enterprises, we are optimistic that the company's management will fully release its operational and management vitality and bring more new ideas to the company's future development.

Risk warning: economic downturn in export markets such as the US and Southeast Asia, rising raw material prices, etc.