Incident: From January to June 2016, the company achieved operating income of 207 million yuan, a year-on-year decrease of 14.89%; net profit attributable to shareholders of listed companies was 8.732 million yuan, a year-on-year decrease of 13.52%; net profit after deduction of 6.74434 million yuan, an increase of 5.43% over the previous year; and earnings per share were 0.03 yuan/share. The company expects net profit attributable to shareholders of listed companies to grow at a year-on-year rate of -30% to 20% from January to September 2016. Opinion: A steady recovery in the company's performance can be expected. In the first half of 2016, it achieved revenue of 207 million yuan, a year-on-year decrease of 14.89%; in the second quarter, revenue of 96 million yuan was achieved, a year-on-year decrease of 13.38%. It was mainly affected by the Russian market in the short term, and the company's overseas business revenue declined. By product, fur clothing, fur fur sheets, fur accessories, mink, fashion, and fur fabrics accounted for 64.82%, 2.08%, 1.3%, 1.04%, 0.58%, and 0.04%, respectively. The year-on-year changes were -90.41%, 199.7%, -48.19%, -4.6%, -12.53%, and 100%, respectively. By region, export sales and domestic sales accounted for 41.2% and 28.66% of revenue, respectively, down 36.22% and 13.88% year-on-year respectively. The company continuously integrates upstream resources and accelerates the construction of downstream channels, and has completed the construction of a complete industrial layout from “special animal breeding - fur raw fur trading - fur raw fur processing - fur clothing design and production - fur clothing sales - fur pledge financing”. Increased cost ratios reduce profit margins. In the first half of 2016, the comprehensive gross margin increased by 5.41 percentage points to 35.57% year-on-year, thanks to the company's integration of upstream resources to strengthen mink breeding in overseas farms. The expense ratio increased 4.76 percentage points year-on-year to 30.51% during the period, mainly due to increased sales expenses and administrative expenses. The increase in gross margin was offset by an increase in the cost ratio, which reduced profit margins. Net profit to mother fell 13.52% year on year to 8.732 million yuan in the first half of 2016, and net profit after deduction increased 5.43% year on year to 6.743 million yuan. The company predicts net profit attributable to January-September 2016 of 5.583 million yuan to 9.5662 million yuan, a year-on-year increase of -30.00% to 20.00%. Huas continues to explore the economic value of influencers. 1) In May 2015, Huasi Co., Ltd. invested 82.53 million yuan in Youshe Technology (the operating entity of “WeChat”), holding 30% of the shares; in July 2015, WeChat parent company Youshe Technology and Sina Weibo became partners and signed a three-year “Weibo and WeChat Strategic Cooperation Agreement”. The two sides will cooperate in the construction and operation of social e-commerce platforms, platform APIs, and big data analysis. As the largest open social media in the country, Sina Weibo is expected to continue to provide strong support and space for the explosive growth of the WeChat business in the future. 2) The company plans to acquire 10% of Mingyue Xia's shares in the future through its subsidiary Huazhuo Investment, at a transfer price of 5 million yuan to further improve the influencer e-commerce industry chain. Future Moments is an influencer management agency that focuses on incubating beauty social e-commerce. It has now signed contracts with 20 influencers with strong e-commerce monetization capabilities, including “Wang Yuepeng Niko”. The core team has many years of relevant experience in social media. Huasi Co., Ltd. will use future moments to open up fan marketing and e-commerce operations, and effectively link and integrate resources such as influencer incubation, social platforms, and supply chains. It is expected that in the future, the company will continue to expand and deploy in the mobile social e-commerce industry chain. Conclusion: The company has an industry-leading advantage in the layout of the entire fur industry chain. It is optimistic about the development prospects of mobile social e-commerce and the company's strategic layout using micro-selling, and looks forward to the company's continued expansion and layout in the mobile social e-commerce industry chain. At present, the company's fixed increase project has passed. It plans to use 1,431 yuan/share to raise 600 million yuan to deepen the industrial chain layout. The majority shareholders have promised to subscribe for 60 million yuan. The majority shareholders' subscription shows confidence and provides a margin of safety. Without considering fixed growth and micro-selling social e-commerce business, the company's 2016-2018 EPS is estimated to be 0.18, 0.23, and 0.28 yuan, respectively. The PE corresponding to the current stock price is 85.9, 67.3, and 55.6 times, respectively, maintaining a “highly recommended” rating. Risk warning: The transformation of social e-commerce falls short of expectations, and the main business continues to be sluggish