Event: On April 19, the company released its 2015 annual report. During the reporting period, the main business revenue was 247 million yuan, an increase of 102.45% over the previous year, and net profit attributable to the parent company - 35.66 million yuan. At the same time, the company released its 2016 quarterly report. During the reporting period, it achieved operating income of 133 million yuan, an increase of 648.15% over the previous year, and net profit attributable to the parent company - 16.3462 million yuan, an increase of 101% in losses over the previous year. Our analysis and judgment: Lower prices of beef and sheep products in the market are dragging down gross margin, and the “Big Beef Cow Strategy” has driven a sharp increase in revenue from the livestock breeding and fattening business. In 2015, the company's “Big Beef Cow Strategy” drove livestock breeding sales and production and marketing of beef and lamb products, and built a new slaughterhouse to expand production capacity. During the reporting period, the sales revenue of the livestock breeding business increased 620% year on year, and the revenue from the fattening business increased 3684.88% year on year. The livestock breeding and cattle and sheep products business continued the 15-year sales revenue growth trend in the first quarter of 2016, mainly due to the breeding sales of Australian subsidiaries and the gradual implementation of the “Big Beef Cattle Strategy”. In 2015, the company's gross margin declined due to the slump in the global dairy market, lower domestic and foreign breeding prices, and lower prices for cattle and sheep products. It is expected that with the gradual implementation of the “Big Beef Cow Strategy”, the layout of the company's entire beef cattle industry chain will gradually improve, and the company's impact on market fluctuations will gradually decrease. The company's entire industry chain lays out Angus beef cattle breeding, and the products are positioned in high-end restaurants. The company introduced purebred Angus cows from Australia and raised them according to US grain-fed beef standards, positioned the Western food and foreign food consumer markets for high-end beef in China, and filled the supply and demand gap for high-end beef in China. The purebred Angus beef beef produced by the company is not only of better meat quality and higher grade than grass-fed beef imported from Australia and New Zealand, but even though it also has a strong price competitive advantage compared to American grain-fed beef of the same grade, the original excellent germplasm and pasture advantages have established a certain barrier to the company's entire industry chain strategy for large beef cattle, and its differentiated competitive advantage is remarkable. The company took the lead in seizing grassland resources, adopted cooperative farming with farmers, achieved asset-light breeding, and gradually entered the harvest period. Through the “company+farmer” farming model, the quality of germplasm and food safety guaranteed by the “two belts in the middle”, the company achieves traceability at the source, sells to high-end consumer markets at the terminal, provides farmers with breeding technical services and financing support in the middle, improves farmers' breeding efficiency, reduces the company's fixed asset investment risks and production costs, and helps expand the scale of farming. We expect the number of purebred Angus to be released in 16-18 to reach 2,500/7000/14,000 heads, with an average gross profit of more than 40%. Earnings are about to enter a period of reverse high growth. High-end western beef is the main direction of beef consumption upgrading. The domestic beef market is about 400 billion dollars, and the high-end Western beef market has increased 100 times in 9 years, reaching 60 to 70 billion dollars. The rise of the middle class and the post-90s, influenced by Western culture, became the main consumer force behind the continued growth in demand. The high-end western beef market is a new blue ocean. 1) Smuggled beef from the US, which has traditionally occupied this market, is gradually declining; 2) domestic beef is an isolated market from high-end Western beef due to insufficient variety and business philosophy; 3) Imported Australian beef is limited by breeding methods and slaughter industry systems, and is a middle- to low-end beef that cannot meet high-end catering needs. Investment suggestion: Due to the uncertainty of distribution issues, the impact of additional distribution will not be considered yet. We expect the company to achieve net profit of 0.39/2.07/328 million yuan in 2016-18, corresponding to EPS of 0.21/1.11/1.75 yuan. Maintaining the buy-A investment rating, 25 times PE in 2017, the target price for 6 months is 27 yuan. Risk warning: policy risk; food safety risk;