Profit is predicted to fall 34.9% year on year. The company released a performance report: in the first half of 2016, operating income was 10.81 billion yuan, down about 9.8% year on year, operating profit was 0.54 billion yuan, down 49.3% year on year; net profit attributable to shareholders of listed companies was 0.705 billion yuan, down 34.9% year on year. Key points of concern 2Q gross margin was clearly under pressure, and expenses rose faster: the company's sales volume in the second quarter reached 0.061 million vehicles, down 2.7% year on year, and operating income in the second quarter reached 5.47 billion yuan, down 3.0% year on year; the decline in sales and revenue in the second quarter was significantly narrower than in the first quarter; the company's net profit in the second quarter was 0.29 billion yuan, down 42.7% year on year; we expect the main reason is that sales volume and revenue in the second quarter continued to fall short of expectations. The company also stepped up its price reduction promotion efforts in the first half of the year. It is expected that gross margin will be suppressed, while expenses will rise rapidly. Traditional models are gradually stabilizing, and the increase in new models is the key: the company's 2Q light bus and pickup truck sales were 0.018/0.015 million units, up 5.6%/29.9% year on year, but sales of light trucks and Yusheng SUVs are still relatively declining. Looking at the second half of the year, the company's light truck sales are expected to improve, and traditional models are already showing signs of stabilization. However, the two SUVs Yusheng and Everest are limited by channels and products, and it is expected that it will still be difficult for them to improve. Beginning in the third quarter, the company's Ford MPV Turio and Yusheng S330 will officially go on sale. Whether the new models will increase in the future will have a key impact on the company's future performance growth. The company's management turnover has been completed, and the annual revenue growth target remains the same: the company's management has been replaced in the early stages, and the new management is still optimistic about the company's business goal of achieving positive growth this year. We expect the company's sales growth to resume in the second half of the year, driven by new models. The company's current product strategy is a combination of commercial multiplication, and it will enter the two new segments of the SUV and MPV; in order to change the current channel problem, the company will strengthen cooperation and sinking in the three channels of Ford, JMC, and Shengyu to further explore the market. Valuation and recommendations Taking into account the company's current promotion efforts, we slightly lowered the company's 2016/17 net profit forecast to 2.07/2.74 billion yuan, an adjustment of -7.2%/-13%, temporarily keeping the company's A/B share neutral rating unchanged, keeping the target price of 25 yuan A shares unchanged (corresponding to 10.4x 2016e P/E), and lowering the target price of Jiangling B to HK$20 (corresponding to 7.1x2016e P/E), a 20% reduction. The new risky car went on sale and sales fell short of expectations.