Key investment points: The leading automotive fine chemicals company, which has reported a low performance, has several major automotive fine chemicals that account for about 30% of the market share in the vehicle OEM sector, and occupy a decisive share in Germany and the US. Recently, the company released its 2016 semi-annual report. During the reporting period, it achieved operating income of 960 million yuan, an increase of 11.4%; net profit attributable to shareholders of listed companies of 66.75 million yuan, a year-on-year decrease of 8.2%; a year-on-year decrease of 17.6% after deduction, basic earnings per share were 0.09 yuan, a year-on-year decrease of 10%; and gross margin decreased 1.85 percentage points from the same period last year. Mainly due to increased labor costs and increased depreciation and amortization expenses due to the completion and commissioning of initial fund-raising projects. China's automobile aftermarket is still in its infancy. The market space is large in the mature international automobile market. The profit from the vehicle sales business accounts for about 3-5% of the overall profit of the automobile industry chain, and the profit from the after-sales maintenance business accounts for about 15-18% of the overall profit of the automobile industry chain. According to the average annual growth rate of domestic passenger cars in recent years and the steady increase in car ownership, the passenger car after-sales maintenance service market space is growing at an average annual rate of more than 20%, with a market capacity of hundreds of billions of dollars. Compared with mature international markets, the domestic automobile after-sales maintenance industry is still in the early stages of development. Currently, the industry is still dominated by 4s stores. Under the impetus of the country, it is expected that the monopoly will gradually be broken down, which is conducive to the development of chain business model stores. It has professional, standardized, and cost-effective business characteristics, and the 2S store chain business model has begun to show competitiveness. Focus on developing chain 2S stores In March 2015, the company completed its first fixed increase after listing. The actual net capital raised was 896 million yuan, of which about 700 million yuan was used to build a national chain car aftermarket 2S store project. The construction project plans to build 110 stores in 12 key cities surrounding the company's four factory bases in Foshan, Changchun, Shanghai and Chengdu, expanding the product market space from the OEM market to the larger and more profitable AM market, thus driving the double growth of the company's revenue and profitability. Nearly 200 million yuan was used to increase capital for Shanghai Delian Auto Care, build an automobile aftermarket channel and online marketing platform, and build a comprehensive automotive after-sales maintenance business platform integrating direct management, franchise and online sales. Profit forecast and investment rating: The first coverage gives an increase in holdings rating as the 2S store, which was invested in the first phase, gradually contributing to revenue. It is estimated that the company's 2016/2017/2018 EPS will be 0.25/0.31/0.38 yuan, respectively. Corresponding to the current stock price PE is 34/28/23 times, respectively, and the first coverage gives an increase rating. Risk warning: Anti-monopoly progress in the automotive aftermarket fell short of expectations; rising real estate prices affected the company's progress in purchasing stores; the market development of German Union Auto Care fell short of expectations.