MiG is increasing the proportion of its own stores. On June 23, 2015, MiG reached an acquisition agreement with two distributors to acquire their existing distribution channels and 66 retail stores at a total cost of RMB 106.8 million. The acquisition is expected to be fully completed by the end of December 2015. We believe that self-operated stores will help increase gross profit margins, but at the same time, they will also increase operating expenses.

Excluding the impact of one-time listing fees of RMB 12.6 million in the first half of 2014, adjusted net profit for the first half of 2015 fell 5.1% year over year to RMB 53 million, lower than our expectations. Revenue fell 8.0% year-on-year to RMB 290 million in the first half of 2015, mainly dragged down by weak market demand. We expect earnings per share to rise 2.8%, 23.7% and 9.9% year-on-year from 2015 to 2017 to RMB 0.174, RMB 0.215, and RMB 0.236, respectively.

Maintained the “buy” rating but lowered the target price to HK$1.40. MiG's stock price is currently equivalent to 3.0 times the 2015 price-earnings ratio, which is at a very low level and is 11.6 times the industry average of 73.9%. We believe MiG will benefit from the continuous development of the children's products market driven by the “two-child policy”. We maintained our “buy” rating but lowered our target price from HK$1.52 to HK$1.40 to reflect lower profit expectations. The new target price is equivalent to 6.4 times, 5.2 times, and 4.7 times the price-earnings ratio of 2015, 2016, and 2017, respectively.