Event description Xunxing Co., Ltd. (002762) published its 2015 annual report and 2016 quarterly report. The main operating results are as follows: in 2015, the company achieved operating income of 1,041 million yuan, a year-on-year decrease of 0.77%; net profit attributable to shareholders of listed companies was 719.683 million yuan, a year-on-year decrease of 7.97%; and basic EPS of 0.23 yuan/share, a year-on-year decrease of 8.00%. The company plans to distribute cash dividends of 0.8 yuan (tax included) to all shareholders for every 10 shares based on a total share capital of 358 million shares. In the first quarter of 2016, the company achieved operating income of 195 million yuan, an increase of 3.92% over the previous year; net profit attributable to shareholders of listed companies of 5.8823 million yuan, an increase of 444.51% over the previous year; and basic EPS of 0.017 yuan/share, an increase of 325% over the previous year. Incident review Operations were stable throughout 2015, and revenue resumed positive growth in the first quarter of 2016. The company's main business is the R&D, production and sales of zipper products. As accessory products for apparel products, demand is significantly affected by terminal demand for related products. “SBS” leverages the advantages of the number one zipper brand in China to ensure the stability of order sources by increasing the share of cooperation with key customers. Based on a slight decrease of 0.77% year-on-year in revenue for the full year of 2015, “SBS” achieved a positive growth of 3.92% year-on-year in the first quarter of 2016. Looking at the regional structure, in 2015, domestic sales revenue was 834 million yuan, the sales scale was basically stable, and the revenue contribution was stable at 80%; export sales revenue was 207 million yuan, a decrease of 5.25% over the previous year. The gross margin is basically stable, and the increase in the cost ratio is dragging down the net interest rate. The company's zipper product structure is basically stable, and the sales share of high-margin strip zippers is basically stable at 60%; among them, slider products achieved sales revenue of 183 million yuan, a year-on-year increase of 21.69%, a year-on-year increase of 3.25 percentage points to 17.60%. Affected by a sharp increase in cost of 31.74%, although the unit price of the product was slightly adjusted, the gross profit margin of a single product fell 5.68 percentage points to 25.51% year on year; affected by the year-on-year increase in gross margin of other categories of products, the gross margin of the main business increased slightly by 0.51 percentage points year on year to year 30.50% Combined with the impact of the increase in the cost ratio during the period, the net interest rate decreased by 0.54 percentage points to 6.91% year on year. The receipt of capital raised funds optimized the financial structure and significantly boosted the performance of the first quarter. The company's fixed capital increase was received on December 15, 2015, of which 200 million yuan was used to repay bank loans and 102 million yuan was used to supplement working capital. Benefiting from bank loan repayment, financial expenses in the first quarter decreased by 4.889 million yuan, significantly boosting the company's performance, and achieved a year-on-year increase in net profit of 4.8836 million yuan in the first quarter, an increase of 444.51%. Cultivate the “second main business” across borders to create a two-wheel drive pattern of traditional manufacturing and emerging health industries. On the basis of increasing investment in research and stabilizing the growth of the main business, the company uses the sports industry resources of Fujian Xunxing Group Co., Ltd., the majority shareholder, to actively cultivate businesses such as venues, training, brokerage, and events, and is actively searching for potential mergers and acquisitions. The company's 2016-2017 EPS is estimated to be 0.25 yuan and 0.30 yuan respectively, corresponding to the current valuation of 53 times and 45 times, maintaining the “buy” rating.