Main points of investment:

In the first half of 2016, the EPS was 0.11 yuan, and the return net profit increased by 52.7% over the same period last year, which was in line with expectations. In the first half of 2016, the company achieved operating income of 4.1 billion yuan, an increase of 22% over the same period last year, and a net profit of 80.19 million yuan, an increase of 52.7% over the same period last year. The net profit of non-parent was 48.13 million yuan, an increase of 16.5% compared with the same period last year. The growth of the company's performance is mainly due to the explosive growth of the automobile interior business, and the gross profit margin of each major business has increased. In addition, the company's non-recurrent profit and loss mainly came from the investment income of 37.57 million yuan from the disposal of corporate shares in the first half of the year.

Gross profit margin rose 3.3pct, expense rate increased during the period, asset quality is slightly under pressure. In the first half of 2016, the company's gross profit margin rose 3.3pct to 10.7%. The rate of sales expenses and management expenses increased by 0.4pct and 2pct to 3.8% and 4.6% respectively, mainly affected by mergers and acquisitions, while financial expenses increased by 48.62 million over the same period last year, of which 33.89 million yuan was affected by the exchange rate. In the first half of the year, the company's inventory increased by 25.37 million yuan to 460 million yuan compared with the beginning of the year, accounts receivable increased by 140 million yuan to 840 million yuan compared with the beginning of the year, and the net operating cash flow was-130 million yuan.

The growth of automobile interior business is gratifying, the growth of trade business is higher than expected, the business of textile new materials is growing again, and the performance of investment target is excellent. (1) the growth of the company's trade business in the first half of the year was slightly higher than expected: the compound growth rate of the company's trade business in the past five years was 4.4%, while the income from foreign trade import and export business in the first half of 2016 increased by 16% year-on-year to 2.8 billion yuan, and the gross profit margin rose from 5% to 8%. Revenue from domestic sales increased by 8% to 490 million yuan, and gross profit margin decreased from 5% to 3%. The growth of trade business is higher than expected, and it is determined to transform and upgrade to a self-owned supply chain integration service provider. (2) the revenue of the company's auto interior business in the first half of the year increased by 80% to 1.14 billion yuan compared with the same period last year, accounting for 25% of the total revenue from 18%; the gross profit margin increased from 12% to 13%. The company will integrate resources to build a global production platform in the future to achieve the "production and marketing" strategy, and the business is expected to maintain rapid development in the future. (3) the company's textile new materials business recovered growth in the first half of the year: revenue reached 99.39 million yuan, an increase of 3.4% over the same period last year, and the gross profit margin remained at 21%.

(4) the performance of the investment target is excellent: the NYX (35% shareholding, American automobile interior manufacturing enterprise) has a revenue of 1.16 billion yuan and an operating profit of 250 million yuan in the first half of the year, contributing 21.08 million yuan to the company's investment income; the acquired target PFI (100% shareholding, an excellent American home textile design and sales company) achieved revenue of about 159 million yuan and a total profit of about 6.1 million yuan.

It is expected to benefit from the full implementation of the reform of state-owned enterprises and a high proportion of subscriptions by controlling shareholders. (1) Shanghai Textile Group, the controlling shareholder, has only two listed companies, and the asset securitization rate is less than 30%. It is expected to benefit from the reform of state-owned enterprises: as one of the only two listing platforms under the textile group, the China News once again stressed that there may be high-quality asset injection into the group. (2) the company plans to raise an additional 1.13 billion yuan to invest in the production of carbon fiber and its prepreg, expand the production capacity of automobile interiors, acquire shares in PFI100% and acquire shares in NYX35%: the controlling shareholder, Shenda Group, subscribes 31%, with a lock-up period of 3 years, demonstrating its confidence in the development of the company.

The target of benefit from the reform of Shanghai state-owned enterprises is expected to be injected into the group's high-quality assets, auto interior business begins to break out, trade business grows faster than expected, textile new materials business recovers growth, epitaxial mergers and acquisitions continue, and the rating of increasing holdings is maintained. We maintained that the EPS for 16-18 years was 0.32 euro 0.38 RMB 0.43 yuan respectively, and the corresponding PE was 38-32-29 times. Considering the broad prospects of the company's automobile interior business, the landing of the reform of state-owned enterprises in Shanghai is expected to be strong, and it is expected that there will continue to be the landing of epitaxial mergers and acquisitions to maintain the overweight rating.