Report Highlights Incident Description Shandong Ruyi (002193) released its 2015 semi-annual report. The main operating results are as follows: during the reporting period, the company achieved operating income of 283 million yuan, up 0.58% year on year; net profit attributable to shareholders of listed companies was 012 million yuan, up 30.60% year on year; basic earnings per share was 0.07 yuan/share, up 16.67% year on year, of which earnings per share for the second quarter were 0.05 yuan/share. Incident review The company's operating costs rose in the first half of the year, which dragged down the gross profit margin. In the first half of 2015, the company adhered to the development concept of “high-end positioning, quality strategy” and aimed to “enhance comprehensive profitability” and achieved operating income of 283 million yuan, an increase of 0.58% over the previous year; of these, the second quarter of 2015 achieved operating income of 110 million yuan, an increase of 13.89% over the previous year. Furthermore, the company achieved operating costs of 233 million yuan in the first half of 2015, an increase of 4.72% over the previous year. Compared with the growth rate of operating income, the cost increase was large, so the company's gross margin during the reporting period was 17.85%, down 3.25 percentage points from the same period last year. The period expense ratio declined significantly, leading to an increase in net interest rate. As the company's lean manufacturing continued to advance, period expenses declined; during the reporting period, the company's period expenses were 467.01 million yuan, down 2.74% year on year; and the period expense ratio was 16.49 percent, down 0.56 percentage points year on year, mainly due to lower sales expenses and financial expenses. The company achieved net profit of 11.822 million yuan, an increase of 30.60% over the previous year; the net interest rate was 4.17%, up 0.96 percentage points from the previous year due to the decrease in the cost ratio for the period and the increase in operating income. Revenue contributed to the decline in inventory, and the size of accounts receivable increased. During the reporting period, the company's inventory size decreased to 297 million yuan, a sharp decrease of 37.35% over the previous year; the inventory turnover ratio was 0.61, a slight increase over the same period last year; furthermore, the company's accounts receivable size was 303 million yuan, an increase of 2.14% over the same period last year, accounting for 24.85% of total current assets, an increase of 1.86 percentage points over the same period in 2014. Maintaining a “neutral” rating company with wool textile as its main business, increasing its market share through continuous optimization of product structure, increasing customer development efforts, and increasing market share; during the reporting period, the company plans to raise no more than 2,001 billion dollars through a non-public stock offering to acquire Ruyi Technology apparel assets, 100% of Taian Ruyi's shares, and 51% of Wenzhou Zhuangji's shares, while investing in the construction of Ruyi textile high-end fabric projects, research center projects, Ruyi textile's 2 million high-end suit projects, and repayment of bank loans. Currently, the matter is being audited and evaluated; Will Part of the accounts receivable and inventory of Zhangjiagang Trading Company, a wholly-owned subsidiary, were exchanged for assets already invested in Ruyi Textile's high-end worsted fabric projects and research center projects under construction by the related party Ruyi Technology. With the gradual implementation of the project, the company's performance will gradually improve in the future. We expect the company's EPS in 2015 and 2016 to be 0.16 and 0.17, respectively, with corresponding valuations 98 times and 94 times, maintaining a “neutral” rating.