The operating income of the company in the first half of the year fell 23.6% to 225 million yuan compared with the same period last year, and the net profit decreased by 28% to 67 million compared with the same period last year, mainly due to the restructuring of the company's business. The advertising agency business began to stop in 2016, resulting in an 84% year-on-year decline in revenue from the film and television program sector. In the sports sector alone, revenue rose 82 per cent year-on-year to 195 million yuan, while gross profit rose 58 per cent to 105 million. Although the gross profit margin was down from 62% last year, it still reached 54%. In the sports business, the income related to event operation accounts for 70%, and the income related to sports services accounts for 30%. Of the operating income from sports events, 15% are from newly increased NBL basketball events, 45% from road running events and 40% from other mass sports events.

The leading position in the field of road running has been further strengthened, and the sustainability of road running income has been significantly improved. after the cultivation in the past two years, Zhimei has further strengthened its dominant position in the field of road running, and has obviously opened the gap with other competitors. The company will run more than 20 large marathons in key cities this year (five in 2015). Excluding the provinces in the western region, the company exclusively operates marathons in 11 provincial capitals in 20 provinces, municipalities and autonomous regions. In the four most valuable first-tier cities in Beijing, Shanghai, Guangzhou and Shenzhen, Zhimei will run two marathons. It can be said that Zhimei has a 50% market share in China's commercially valuable marathons. In the just-concluded Shenzhen Marathon, Zhimei competed with major domestic sports industry participants such as Letv, Yingfang and Sports window. Zhimei won by an absolute majority. Zhimei's comprehensive score reached 94 points, with 2-7 scores between 73 and 79. As the operation of the road race becomes more professional and regularized, we believe that the leading company will have more obvious advantages in the follow-up competition, which will greatly enhance the sustainability of the company's revenue and profits in the field of road race operation.

There is still uncertainty about overall revenue and profit growth although the sustainability of the company's revenue and gross profit in the field of road running has greatly improved, but with the maturity of the overall market and the increase of the company's market share, it will be difficult for the road race business to provide sufficient support for the company's long-term rapid growth. The company's subsequent rapid growth must be achieved by projects other than road runs, such as basketball, sports services and venue operations, where the company is still in its infancy and revenue and gross margin growth is still low. Therefore, our current forecast for the company's future growth is relatively conservative. Because of the low base, the company is expected to achieve rapid growth in 2017. Net profit is expected to grow by 194% to 150 million yuan. From 2016 to 2018, we expect the company's net profit to grow by 9% and 19%, respectively.

The company will enter the investment target of Hong Kong Stock Connect and maintain its "overweight" rating. According to the latest Hong Kong Stock Connect rules, if Hong Kong Stock Connect is officially opened before the end of the year, Zhimei will become the standard of Hong Kong stocks with an average market capitalization of 5.9 billion in 2015.7-2016.6. In the next adjustment of the underlying stock, if the market value of Zhimei can be raised to about 6 billion yuan in the second half of 2016, it can still become the target company. The company is the target of the market-wide scarcity of pure sports industry and is expected to benefit from Hong Kong Stock Connect. Based on DCF (13.8% WACC, 3% long-term growth rate), we draw a target price of 2.67 yuan, corresponding to 23 times PE in 2017, maintaining the "overweight" rating.

Risk hint: changes in management lead to a slowdown in business growth; revenue related to sports services and venue operations is slower than expected.