The semi-annual report is close to the expected increase in performance. Kane Co., Ltd. announced net profit of 53.35 million yuan for the first half of 2010, an increase of 206% over the previous year, and earnings per share of 0.27 yuan, close to the company's previous pre-increase announcement (earnings of 0.24-0.28 yuan per share), and slightly higher than our expectations. Revenue in the second quarter increased 15.6% month-on-month, mainly due to strong order demand to improve utilization. However, gross margin declined 2.7 percentage points to 34.6% month-on-month, mainly due to a decline in the gross margin of special food packaging paper. Under proper cost control, net profit rose 17.6% month-on-month. Orders are expected to remain good in the third quarter. According to the company's semi-annual report, net profit for the first half of the first three quarters of 2010 will increase by 85-115% year-on-year (36.06 million yuan in the same period last year). Based on this, the earnings per share range for the third quarter is estimated to be 0.07-0.12 yuan. According to information from our research, the company's order acceptance situation in July is still full, and it is expected that there will be a chance to remain flat in August-September, so the increase in performance is slightly conservative; we expect actual profit opportunities to approach the upper end of the range. The main businesses all maintained a good growth momentum. The company's electrolytic capacitor paper in the first half of the year benefited from weakening industry competition and strong demand, a doubling of revenue and a sharp increase in gross margin; we expect the company's production capacity and market share to continue to increase. The growth rate of the power battery business was slightly lower than our previous expectations. Although gross margin increased by 3 percentage points to 26.2% year on year, and revenue growth reached only 31.5%, we judge that this may be due to a slight lag in mass production of new lithium batteries. Overall, the growth momentum of the company's Fengyao business in the second half of the year was still good. Raise profit estimates. Since the performance for the first half of the year was slightly higher than expected, we raised Kane's 2010 EPS estimate by 4% to 0.51 yuan (the original estimate was 0.49 yuan). The 2011 EPS estimate remained at 0.68 yuan. Maintain a “buy” rating. Profit from the company's traditional electrolytic capacitor paper business continues to exceed expectations, and power batteries and other new products are expected to gradually create new profit growth points. The current price is 13.35 yuan, and the price-earnings ratio for 2010/2011 was 26/20 times, respectively, lower than the average price-earnings ratio of listed companies on the SME board. We maintain our target price of 16.5 yuan (24 times 2011 PE) and reaffirm our “buy” rating. Risk factors: The reversal of the electronics industry cycle causes product demand to fall short of expectations, and the risk of major shareholders reducing holdings.