Event description Falsheng released its 2016 semi-annual performance forecast. During the reporting period, the company achieved net profit attributable to shareholders of listed companies of 38 million yuan to 40 million yuan, compared with the same period last year. Based on this calculation, the company achieved net profit attributable to shareholders of listed companies of 36 million yuan to 38 million yuan in the second quarter, which was 0.1 billion yuan in the same period last year. According to the latest share capital calculation, the EPS for the second quarter was 0.10 yuan to 0.11 yuan. The EPS for the same period last year was 0.003 yuan, and the EPS for the first quarter was 0.01 yuan. The company plans to increase capital to Mashan Factoring with its own capital of 200 million yuan and Mashan Factoring's 2015 undistributed profit of 135 million yuan. Incident reviews Mashan Factoring set sail, and performance in the first half of the year took off: As a large-scale global production base for special medium and fine steel wire ropes, the company's performance in the past five years has not exceeded 0.2 billion yuan due to the relative lack of prosperity in major downstream bridges, construction hardware, etc. The company's performance in the first half of this year increased sharply to 38 million yuan to 40 million yuan, mainly due to the successful acquisition of high-profit Mosan Factoring and its inclusion in the scope of the report. In the context of the current downturn in the real economy, corporate accounts receivable are constantly rising, and the financing needs of commercial factoring counterparts are broad; at the same time, insufficient cash flow of manufacturing enterprises has forced commercial banks to rise in non-performing loan ratios, causing banks and other traditional financial institutions to concentrate on credit services based on interest spreads, and commercial factoring based on accounts receivable has gradually achieved supply substitution. The two sides have jointly promoted Moshan Factoring's high profitability and contributed significantly to the increase in the company's performance. Furthermore, the company's smooth divestment of some of its loss-making assets also helped its performance take off in the first half of the year to a certain extent. Increase capital of Moshan Factoring and increase performance of Liaoyuan: After the company's capital is increased by 335 million yuan, Moshan Factoring's registered capital will increase to 635 million yuan. Compared to the weak profitability of the traditional main steel business, the newly acquired Mosan Factoring net interest rate for the first quarter of 2016 was as high as 23.11%. The company's capital increase will significantly expand the scale of high-quality financial assets and promote the transformation of the financing service platform. At the same time, the high-profit asset expansion will strongly guarantee the smooth implementation of the performance promises promised by the Group, thus leading the company's business performance to continue to grow rapidly. Introduce strategic shareholders to help the financing business advance steadily: Resources and capital are the core competitiveness of the financing business. Take factoring business as an example. On the one hand, resource advantages with a broad range of business reach guarantee the volume and quality of factoring business; on the other hand, capital advantage can ease the extent to which factoring scale is constrained by regulatory leverage, and break through the bottleneck of excessive reliance on financing channels in the profit model. Jiangyin Yaobo, a subsidiary of the Zhongzhi Group, has increased its holdings of Phare many times to win, and its current shareholding ratio is as high as 15%, indicating that there is strong expectation that the China Plant system will enter Phare to win. The entry of Zhongzhi Group, which has diversified businesses, will surely expand the scope of development of corporate financing business. Considering the impact of equity transfers and performance promises on the company's performance growth, the company's 2016 and 2017 EPS are expected to be 0.38 yuan and 0.47 yuan, maintaining the “buy” rating.