Event description Xunxing Co., Ltd. (002098) announced the 2016 three-quarter report: in the first three quarters, the company achieved operating income of 842 million yuan, an increase of 7.26%; realized net profit attributable to shareholders of listed companies of 86 million yuan, an increase of 42.27%; basic earnings per share of 0.24 yuan/share, an increase of 20.00%; in the third quarter, achieved operating income of 288 million yuan, an increase of 17.83%; achieved net profit attributable to shareholders of listed companies of 230 million yuan, up 52.05% year on year; basic earnings per share 0.07 yuan/share. Incident review revenue continued to grow steadily, and gross margin increased slightly in the first three quarters. The company is the largest zipper manufacturer in China. It has a complete zipper production line. It currently has more than 7,000 sets of advanced equipment, a daily production capacity of 5 million pieces, and has a long-term ranking of production and sales volume; at the same time, the “SBS” brand is famous in the industry, is the number one zipper brand in China, and is positioned as a high-end zipper product; in addition, the company has a global marketing network, has five major domestic production bases, and has direct sales and agencies in many foreign countries. “SBS” products are exported to more than 70 countries and regions, and are the preferred partner for many well-known domestic and foreign brands. After the effective implementation of personal service and the “one customer, one policy” policy, the share of cooperation among key customers has increased. At the same time, the elimination of backward production capacity and project transformation have promoted the company's level of automation and informatization. During the reporting period, the company's revenue grew steadily. Revenue for the first three quarters increased 7.26% year on year, of which the third quarter increased 17.83% year on year. Under strict cost control, the company's overall gross margin remained stable, and gross margin rose 3.00pct to 33.89% in the first three quarters. The capital raised is in place, and the financial expense ratio has been drastically reduced, leading to an increase in profitability. In 2015, the company raised capital of 30,07394 million yuan, which enriched capital, optimized the capital structure and financial structure, and reduced current interest expenses. As a result, financial expenses for the first three quarters were drastically reduced by 78.73% year on year, and the financial expenses rate decreased by 2.00pct to 0.49% year on year. Against the backdrop of basic stability in sales/management expenses, the period fee rate decreased by 1.00pct to 19.77% year on year; on the basis of a slight decrease in the period fee rate, the increase in gross margin led to an increase of 2.53pct in net interest rates in the first three quarters 10.26% Inventory size has been reduced, and prepaid accounts have increased significantly due to an increase in prepaid material payments. As of the end of the reporting period, the company's inventory decreased by 0.02% from the beginning of the period to $215 million; prepaid accounts increased by 149.43% from the beginning of the period to $19 million due to the increase in prepaid material payments at the end of the period. On the basis of steady operating cash flow, the company's overall production and sales are expected to be excellent in the future. Cultivate a “second main business” across borders and create a two-wheel drive pattern. While strengthening the main zipper business, the company is actively seeking the big health industry with a lot of room for development as the second main business, creating a two-wheel drive pattern of traditional manufacturing and emerging big health industry to ensure the company's stable development. However, due to the current serious lag in CBA reform, which affects the company's layout in the second main business, mergers and acquisitions related to the big health industry are still being sought and discussed; it is estimated that earnings per share for 2016-2017 are 0.27 yuan and 0.33 yuan, corresponding to the current valuation of 48 times and 40 times, maintaining the “buy” rating. Risk warning: The risks of business transformation.