Commentary incident: The company announced its 2016 interim report, achieving revenue of 88 million yuan, a year-on-year decrease of 7.24%; net profit to mother of 308 million yuan, an increase of 37.53% over the previous year, corresponding EPS of 0.41 yuan, an increase of 36.67% over the previous year. Main view: Investment income increased year-on-year, and investment project reserves are abundant. The company achieved investment income of 448 million yuan in the first half of the year, an increase of 19.9% over the previous year, mainly due to an increase in profit (profit and loss of 273 million yuan during the reporting period) due to the significant impact of loss and an increase in cash dividends for some investment companies (measured in terms of financial assets available for sale). As of the end of the reporting period, the company and various funds funded by the company as the main sponsor held shares in 9 listed companies, 18 investment projects were listed on the New Third Board, and 9 proposed IPOs (1 of which had been reviewed by the Development and Review Commission, 4 had submitted materials to the Securities Regulatory Commission, and 4 were currently receiving listing guidance). In addition, the company and various funds funded by the company as the main sponsor still have 34 participating equity investment companies, which are rich in project reserves. The investment side is progressing steadily, and the pace of “going global” continues to increase. In the first half of 2016, the company and various funds managed by the company invested a total of 18 projects, with an investment amount of 705 million yuan; of these, the company's own capital added 251 million yuan in foreign equity investment, an increase of 262.94% over the previous year, involving 9 invested companies (including funds). During the reporting period, the company further promoted the transformation of specialized investment funds and cooperated with other capital to establish funds for hot industries such as Big Health and New Materials to share their development dividends. At the same time, the company accelerated the pace of deployment outside the province, and on the basis of summing up the experience of the Shenzhen and Yunnan business departments, actively explored the establishment of regional funds in Xi'an, Beijing, Shanghai, Sichuan and other places (the joint establishment of a civil-military integration fund in Xi'an has completed business registration), and has continued to increase the pace of “going global” and has begun overseas investment layout (the investment in the US company Intarcia Therapeutics Inc. has already completed a shareholders' meeting). The listing of Shandong Guotrans Trust is imminent, and there are still expectations for Minsheng Securities. The H share listing of the company's shareholding company Shandong International Trust Company has been approved by the Shandong Banking Regulatory Commission and is expected to be listed on the Hong Kong Stock Exchange within this year. The company holds 6.25% of Shandong Guodian's shares, and the market value of shares is expected to be close to 1 billion dollars after listing. Furthermore, the company holds 4.53% of Minsheng Securities's shares, and we have high expectations that Minsheng Securities will be listed in the next 3 years. Currently, against comparable brokerage firms that are currently listed on A-shares, such as Shanxi Securities and Western Securities, Minsheng's corresponding market value is about 40 billion yuan (4xPb), and the market value of the company's shares should be close to 2 billion yuan. Currently, the book value is only 200 million yuan, so there is obvious room for added value. The scale of traditional business continues to shrink and is expected to stabilize. In the reporting period, the company's traditional abrasives business revenue was 80.37 million yuan, down 5.21% year on year; sanitary ware business revenue was 230,000 yuan, down 63.43% year on year. According to the company's development plan and the development of the traditional business industry, it is expected that the company's abrasives and abrasives business will basically maintain its current scale. Considering that the company streamlined the staffing allocation of traditional businesses last year and developed employee shareholding in the abrasives business through employee participation in investing in subsidiaries, we predict that traditional business revenue will also increase in the second half of the year, but the contribution to the company's overall profit is still small. Investment advice: As the only listing platform for the controlling shareholder Lu Xin Group, the company will directly benefit from state-owned enterprise reform expectations; in addition, profits are expected to continue to be released in the second half of the year through multi-level capital market improvement measures such as the improvement of the New Third Board this year. It is expected that the EPS for 2016-2018 will be 0.50/0.53/0.59 yuan/share, with a purchase rating. Risk warning: Project exit risk; the supporting policies of the New Third Board have not met expectations, and the market is declining.