Revenue increased 3.78%, net profit increased 32.69%, and Q3 single-quarter revenue fell. From January to September 2016, the company achieved operating income of 2,724 million yuan, a year-on-year increase of 3.78%, net profit of 236 million yuan, an increase of 32.69% over the previous year; net profit after deduction of 182 million yuan, an increase of 40.82% over the previous year, and EPS of 0.73 yuan. The net profit growth rate greater than revenue was mainly due to rising gross margin; the remaining shares of the subsidiary Lianfa Thermal Power began merging in August last year; subsidiaries Lianfa Tianxiang Printing and Dyeing, and Lianfa Lingcai gradually reduced losses; increased exchange earnings from RMB depreciation contributed to a reduction in financial expenses, and increased investment income from entrusted loans; the increase in net profit after deducting non-net profit was mainly due to government subsidies and corresponding reduction in investment income. In 16Q3, revenue fell 6.26%, and net profit increased by 46.08%. On a quarterly basis, 15Q1-16Q2 revenue increased by 4.10%, 9.14%, 2.57%, -5.11%, 10.88%, and 7.66% respectively, while net profit increased by 5.25%, 4.68%, -2.97%, -9.99%, 25.94%, and 25.63%, respectively. The decline in revenue in 16Q3 was mainly due to a decrease in the number of orders for yarn-dyed fabrics due to the economic slowdown in Europe and the US. The year-on-year increase in net profit mainly benefited from the increase in gross margin and the increase in exchange profit and loss under the depreciation of the RMB. Gross margin increased, expense ratio decreased, Q3 beneficiary exchange rate depreciation, gross margin increased 4.44PCT; from January to September 2016, the company's gross margin rose 1.65PCT to 21.35%, benefiting from the company's internal management efficiency. Among them, Q3 benefited significantly from the depreciation of the RMB exchange rate, which increased after the conversion of order prices to RMB. 15Q1-16Q3 gross margins are 18.73% (+1.07PCT), 20.60% (-0.09PCT), 19.63% (-0.61PCT), 23.44% (+0.08PCT), 19.10% (+0.37PCT), 20.97% (+0.37PCT), and 24.07% (+4.44PCT). The cost rate for the period from January to September 2016 fell by 0.45PCT to 11.01%. Among them, the sales expense ratio decreased by 0.23PCT to 4.67%, the management expense rate increased by 0.41PCT to 4.66%, and the financial expenses rate decreased by 0.63PCT to 1.67%. The sales, management, and financial expense ratios for 2016 Q3 were 4.87%, 6.17%, and 1.19%, respectively, down 0.35 PCT, up 1.15 PCT, and 0.62 PCT, respectively. Overseas production capacity continues to be released, and the benefits of the devaluation of the RMB are clearly accompanied by rising domestic labor costs. The company is actively adapting to the trend of industrial transfer and gradually shifting production capacity to low-cost Southeast Asian countries. The company has successively invested (acquired) in Lianfa Garment (Cambodia) Company, AMM Garment (Cambodia) Company, and Lianfa Hengyu (Cambodia) Garment Company, and plans to transfer Lianfa Garment's production capacity to Lianfa Hengyu. Currently, the company is operating at full AMM garment production capacity, while Lianfa Hengyu's production capacity utilization rate is 50-60%. It is expected that full production will be achieved next year. Furthermore, since the African region is rich in labor resources, has low production costs for raw materials, land, etc., and enjoys certain tariff concessions, Ethiopia will be a region where companies will focus on capacity layout in the future. The company's products are mainly exported (about 70% of exports in 15 years). Export orders are mainly settled in US dollars, and large-scale imported equipment is mainly settled in foreign currencies such as Japanese yen, US dollars, and euros. Since the foreign exchange reform in August 2015, the renminbi has continued to depreciate against the US dollar, and fell below the 6.7 mark on October 10, 2016. The exchange rate hit a new low in nearly 6 years. As of November 1, the central price of RMB against the US dollar was 6.7734, with a cumulative depreciation of 4.15% since the beginning of the year. The devaluation of RMB will have a positive impact on the company's product exports and exchange profit and loss: 1) In the short term, the company will benefit from RMB depreciation to increase gross margin due to order price lockdown; 2) On the exchange side, since the company's US dollar receivables account period is generally 1-3 months, it will directly generate exchange income; 3) in the long run, the cost of similar international products has declined, and product competitiveness has improved. The direction of the environmental protection and new energy sector is clear, and the direction of investment companies is clear. It is worth looking forward to in 2015.4. The company announced the establishment of a wholly-owned subsidiary, Shanghai Chongshan Investment Company, with a registered capital of 200 million yuan. Currently, the main investment directions include major consumer categories, medical devices, and healthcare. Mainly because these investment directions do not have a ceiling on the scale of production capacity, there is plenty of room for development. Currently, the company is still searching for targets, mainly focusing on the profitability of the project, the certainty of development prospects, and valuation. Initially, targets with certain performance and management team experience will be considered. The company will provide financial support and help the company achieve rapid penetration into emerging industries and find other excellent targets through investment in this target. In 2015.8, the company acquired the remaining 40% of the shares of the subsidiary Lianfa Thermal Power and became a wholly-owned subsidiary; in August 2016, the subsidiary Lianfa Thermal Power changed its name to “Lianfa Environmental New Energy”, and will continue to expand in the field of environmentally friendly new energy in the future. The company has its own supporting facilities for thermal power and sewage treatment. In particular, the cost control and management of sewage treatment are good. In the future, the company will use its capital, talents, and technical advantages to diversify development in terms of environmental protection (sewage treatment, solid waste) and new energy (biomass power generation, photovoltaic power generation, etc.). Currently, the 3MW distributed photovoltaic power generation project built by the company itself is being implemented. It was put into operation in early October, and the operation situation is quite ideal. Performance growth is driven by multiple factors such as RMB depreciation, loss reduction of subsidiaries, consolidation of thermal power companies, and internal management improvements. Maintaining the “buy” rating, the company expects net profit to increase by 15% to 35% in 2016. Mainly due to the improvement in the overall management level of the enterprise, the reduction in costs, and the acquisition of the remaining 40% of Lianfa Environmental New Energy's shares contributed to profit. Subsidiaries Lianfa Tianxiang Printing and Dyeing and Lianfa are gradually reducing losses and export orientation to benefit from RMB depreciation. We believe: 1) The RMB has continued to depreciate since the first three quarters of this year. Affected by the rising risk of Brexit and the sharp rise in the US dollar index in anticipation of the Fed's interest rate hike at the end of the year, the trend of RMB exchange rate depreciation in the later stages is quite clear. The company's products are mainly exported, and are expected to benefit from the increase in order revenue, exchange earnings, and long-term product international competitiveness brought about by the devaluation of the RMB; 2) On the revenue side, the company's revenue has grown steadily in recent years, but 16Q3 was affected by weak international demand, and orders for the main product, yarn-dyed fabric, declined, leading to a decline in Q3 revenue in the short term. It is expected that in the short term, the company will still be under some pressure on order volume in the context of poor demand; 3) On the net profit side, as the company's refined management, cost control of the RMB has increased, and cost control of the RMB has increased. exchange rate The depreciation gross margin is expected to continue to rise. The self-owned brands are still in the start-up phase, small in scale, and have limited performance contributions (fabric brands have grown more than 10% and are developing well, shirt brands are in a transition period from self-operation to franchise, and short-term performance is still under pressure). The subsidiary Lianfa Environmental Renewable Energy's remaining 40% of shares began to be consolidated in September last year and contributed 8 months of profit growth this year. Subsidiaries Lianfa Lingcai and Tianxiang Home Textiles each lost about 20 million yuan last year and reduced losses this year. Multiple factors drove net profit performance to be better than revenue. 4) Chongshan Investment Company and Lianfa Environmental Renewable Energy have extended expectations as transformation operators, and are expected to become new profit growth points for the company; at the end of September 2016, the company's account capital was about 1.2 billion yuan (460 million yuan in monetary capital plus nearly 800 million in other current assets for wealth management products, etc.), with a current market value of 5.9 billion yuan, with a certain margin of safety. 5) In August, the company introduced the “Long-term Incentive Fund Management Measures” (plans to extract 30% within the current year's net profit increase of 100 million yuan and 20% of the portion above 100 million yuan) to attract and motivate senior managers and core key talents, which is conducive to the long-term stable development of performance. We are optimistic that the company will benefit from the growth in performance under the depreciation of the RMB. At the same time, the company still has expectations of extending mergers and acquisitions in the environmental protection and renewable energy secondary sector. Considering that the company is clearly benefiting from the depreciation trend of the RMB exchange rate, it is expected that subsequent gross margin will continue to rise steadily. The EPS for 16-18 was 1.13, 1.28, and 1.44 yuan, corresponding to PE 16 times in 2016. The valuation is low and there are future transformation expectations, maintaining a “buy” rating. Risk warning: risk of exchange rate fluctuations, risk of falling overseas demand.