Incident description Falsheng released its 2016 mid-year report. After tracing the Moshan factoring statements for the first half of 2015 and adjusting the company's financial base, the company achieved operating income of 944 million yuan in the first half of the year, an increase of 13.59% over the previous year; operating costs of 782 million yuan, an increase of 14.75% over the previous year; realized net profit attributable to the parent company of 39 million yuan, an increase of 18.49% over the previous year; and achieved an EPS of 0.10 yuan in the first half of the year. The incident commented on the merger of high-quality factoring assets, and the performance of the first half of the year increased steadily: the company successfully injected Moshan Factoring's high-quality financial assets on the basis of the traditional steel wire rope business to achieve a two-wheel drive strategy for the “steel+factoring” business. Although the gross margin of the steel wire rope business fell by 2.47 percentage points due to the rise in raw material wire and zinc ingot prices in the first half of the year, which caused the gross profit of steel wire rope products to drop by 17 million yuan, benefiting from a marked year-on-year improvement in the scale and profit of Mosan factoring, the company's operating performance improved steadily in the first half of the year after retroactive adjustments. In the current context of a relatively weak economy, the level of corporate accounts receivable continues to rise, and the demand for commercial factoring financing is broad. At the same time, the rise in the non-performing loan ratio of commercial banks has triggered the gradual supply substitution of commercial factoring based on accounts receivable. Therefore, under the premise of the gradual release of commercial factoring market space, the scale and profit of Moshan Factoring have developed rapidly. In the first half of the year, Moshan Factoring's operating income and gross profit increased by 105.05% and 56.05% year-on-year respectively. Up to now, Moshan Factoring has successfully issued a three-phase asset securitization product, raising capital of 1.7 billion yuan. Financing channels such as contract private equity funds, bank credit, and factoring funds have been continuously expanded. At the same time, capital costs are also gradually being reduced, further confirming the obvious comparative advantages of Moshan Factoring and achieving rapid development. Furthermore, the company's smooth divestment of some traditional loss-making assets also helped improve its performance in the first half of the year to a certain extent. Introduce strategic shareholders to help the financing business advance steadily: resources and capital are the core competitiveness of the financing business. Take factoring business as an example. On the one hand, resource advantages with extensive business reach guarantee the volume and quality of factoring business; on the other hand, capital advantage can ease the extent to which factoring scale is constrained by regulatory leverage, and break through the bottleneck of excessive reliance on financing channels in profit models. Jiangyin Yaobo, a subsidiary of Zhongzhi Group, has increased its holdings to Phare's victory several times. The current shareholding ratio is as high as 15%, which indicates that the Chinese plant system is expected to win in Phare. The entry of Zhongzhi Group, which has diversified businesses, will surely expand the scope of development of corporate financing business. The 2016 and 2017 EPS are expected to be 0.32 yuan and 0.49 yuan respectively, maintaining the “buy” rating.