Key points of the report: Xunxing Co., Ltd. (002098) released the 2015 three-quarter report. The main operating results were as follows: in the first three quarters, the company achieved operating income of 785 million yuan, a decrease of 0.26% over the same period last year; realized net profit attributable to shareholders of listed companies of 60.7 million yuan, down 9.30% from the same period last year; and realized earnings per share of 0.20 yuan, down 9.09% from the same period last year. Among them, in the third quarter, operating income was 244 million yuan, a decrease of 0.92% over the same period last year; net profit attributable to shareholders of listed companies was 15.42 million yuan, up 10.97% from the same period last year; and earnings per share of 0.05 yuan, up 25% year on year. Incident review The revenue and gross margin for the first three quarters were basically the same as the previous year. In the first three quarters of 2015, the company achieved operating income of 785 million yuan, a decrease of 0.26% over the same period last year; operating costs of 542 million yuan, a decrease of 0.31% over the same period last year; and the company's gross margin was 30.89%, up 0.03 percentage points from the same period last year. In the 1st to 3rd quarter of 2015, the company achieved revenue of 187 million yuan, 353 million yuan and 244 million yuan respectively, with a year-on-year increase of 1.89%, a decrease of 0.91%, and a decrease of 0.92%, respectively. The cost ratio for the period increased slightly, and net interest rate fell by less than 1 percentage point. In the first three quarters of 2015, the company's sales expenses, management expenses, and financial expenses were 61.27 million yuan, 82.26 million yuan, and 19.55 million yuan, respectively, up 2.32%, 6.80%, and 19.03% from the previous year. Changes in financial expenses were mainly affected by factors such as increased exchange losses in the first half of the year. In the reporting period, the company's sales expense ratio, management expense ratio and financial expense ratio were 7.80%, 10.48%, and 2.49% respectively, and the period expense ratio was 20.77%, up 0.31 percentage points from the same period last year. With gross margin and period expense ratios basically at the same level as the previous year, the company's net profit margin for the first three quarters was 7.73%, down 0.77 percentage points from the same period last year. Affected by the reduction in government subsidies, net profit declined significantly until the end of the reporting period. As of the end of the reporting period, the size of the company's inventory and accounts receivable was 222 million yuan and 253 million yuan respectively, down 5.01% and 3.19% from the previous year, respectively. The company's fixed asset clean-up increased by 12.91 million yuan in the current period, due to a fire in the company's electroplating workshop in June. The company's non-operating income during the reporting period decreased by 4.405 million yuan, a decrease of 43.24%, over the same period last year because it obtained immediate bonus funds from real estate tax and land use tax in the same period last year, and there was no such government subsidy revenue in the current period. Affected by the above factors, the company achieved imputed net profit of 60.7 million yuan in the first three quarters, down 9.30% from the same period last year; in the third quarter, it realized imputed net profit of 15.42 million yuan, up 10.97% from the same period last year. Maintaining a “buy” rating, the company is a leader in the zipper industry in China. During the reporting period, the company actively adjusted its product and customer structure, and sought orders to stabilize business fundamentals. By strengthening internal management, the operating efficiency remained steady. Furthermore, the company relies on the Fujian Xunxing Basketball Club, which is owned by the majority shareholder Xun Xing Group, to promote the operation of the basketball industry and lay out the sports industry. In January 2015, the company launched a refinancing plan for the non-public offering of shares and the non-public offering of 24 million shares. The relevant proposals have been accepted by the Securities Regulatory Commission. As the company continues to advance its fixed growth projects and deepens its layout in the sports industry, the company will gain more room for growth, and its long-term development is worthy of optimism. It is estimated that the company's EPS for 2015 and 2016 will be 0.31 and 0.37 yuan respectively, corresponding valuations 41 times and 34 times. Maintain a “buy” rating.