The leading position of non-performing asset management has been recognized by the market, but there are still doubts about the business model and profit prospects. To this end, we have analyzed a sample of China Huarong, the leader of AMC, in order to gain some insight. Under supply-side reforms, the AMC industry has ushered in a boom, and favorable policies have continued, and a major trend in the industry has been formed. In 2015, the non-performing loan ratio of commercial banks reached 1.67%, the balance of non-performing loans was 1.3 trillion yuan, and the non-performing accounts receivable of industrial enterprises was 230 billion yuan. We conservatively estimate that the size of non-performing assets could reach $1.8 trillion in 2016. Under supply-side reforms, the generation of non-performing assets is likely to accelerate. The company is the absolute leader in the AMC industry, has outstanding profitability, and the company's non-performing asset management scale ranks first among the four AMCs, with a market share of 32%. In 2015, the company's operating income and net profit were 40.5 billion yuan and 119 billion yuan respectively, up 42% and 28% year on year, and ROE was 20%. Against the backdrop of slowing economic growth, the ROE for the next 3 years is expected to be 15%-18%. From focusing on restructuring to returning to tradition: seizing new opportunities for development From 2010 to 2015, the company achieved leapfrog development by focusing on restructuring business. In 2015, the company's stock of net non-performing assets in the restructuring category reached 222.1 billion yuan, obtained business revenue of 26 billion yuan, and an average monthly annualized yield of 12.5%. It also achieved excellent risk control by relying on strict project screening, strong research and pricing capabilities, and an adequate mortgage guarantee ratio (acquisition cost/collateral market value ratio is 36.2%). Beginning in 2016, the company's business focus will return to traditional acquisition and disposal business, fully benefit from the “new normal” of the economy, and seize new development opportunities to monetize the company's research and pricing advantages. Build a comprehensive platform for the whole life cycle and explore new profit models In addition to the main business of non-performing asset management, the company has established a comprehensive financial business platform including banks, brokerage firms, trusts, etc. At the same time, it is actively exploring new profit models such as credit asset securitization, “Internet +”, and consumer finance. In 2015, the non-AMC business contributed approximately 46% of operating profit. The excess return model estimates the company's reasonable valuation is 3.98 Hong Kong dollars. Using the excess return model, we believe that the company's reasonable valuation should be 3.98. Compared with the current stock price of 2.82 HKD/share (closing price on April 6, 2016), there is 30% room, and we believe that the company's asset safety is high and its financing capacity has a natural advantage, giving it a “buy” rating. Risk warning 1) Asset quality has deteriorated; 2) The economy continues to be sluggish, leading to a sharp decline in the company's disposal yield.