Investment highlights 2016H1's performance growth is in line with market expectations. During the reporting period, the company achieved operating income of 179 million yuan, an increase of 2.32% over the previous year; realized net profit attributable to ordinary shareholders of listed companies was 17.4845 million yuan, an increase of 14.48% over the previous year. The company actively controlled costs during the reporting period. Coupled with rising exchange rates and government subsidies, the net profit growth rate was higher than the revenue growth rate, which was basically in line with market expectations. Expand the variety of musical instrument sales to help increase revenue steadily. During the reporting period, the company greatly increased the types of musical instrument sales, from the initial piano to include electroacoustic pianos, guitars, violins, etc.; at the same time, the company actively broadened marketing channels and realized simultaneous operation of offline stores and online e-commerce platforms, and linked with the art education and training industry chain, promoting an increase in sales volume of musical instruments, starting with pianos, and helping revenue to rise steadily. Further promote art education and “two legs” to create an Internet art education platform. During the reporting period, the company continued to further develop art education and training programs and actively expand the downstream musical instrument industry chain layout. In terms of expansion, in response to differences in the market environment and conditions, the company carried out art education and training work through two methods of shareholding and franchise. Among them, the number of participating training institutions has increased to 21, and 86 franchisees have successfully signed contracts, creating a trend of sparks. In addition, the company and Beijing University of Posts and Telecommunications are actively developing art education MOOCs, and are committed to launching the first domestic education network for the field of art education to connect with the company's smart electric piano products. The prototype of an Internet art education platform has already taken shape. Continue to be optimistic about the company's smart piano+art training linkage model. The company clearly proposed an “Internet +” strategic upgrade. While developing smart pianos, the company actively integrates offline art training resources, promotes the joint development of smart pianos and art training education, realizes the complementary advantages of online and offline piano teaching and O2O, and accelerates Helen's transformation and upgrading from a traditional manufacturing industry to a comprehensive cultural enterprise. The company established Beijing Hailun Network Information Technology Company to provide software, hardware and network support for the company's smart piano and online education. Intelligent score and online education platforms will soon be launched, and the transformation results are gradually showing. Risk warning. The decline in gross margin; the rise in competitive pressure brought about by falling prices of imported pianos; the progress of the expansion of the art training business from other locations did not meet expectations, etc. Earnings forecasts, valuations and investment ratings. We maintain our 2016 and 2018 EPS forecast at 0.16/0.18/0.22 yuan. The current price is 17.82 yuan, corresponding to PE 113/98/81 times. We use a segmented valuation method for the company, that is, the company's traditional business has an average annual market value of about 4 billion yuan. The art education business is expected to achieve net equity profit of 122 million yuan in 2020, with a market value of 3.3 billion yuan at a 10% discount until the end of 2016. Therefore, the company's reasonable market capitalization space is about 7.3 billion yuan, and the target price is 29 yuan, maintaining the “buy” rating.