The main factor supporting the ratings was that the performance of the first half of 2015 fell short of expectations. Revenue increased 53% year over year to 1.38 billion yuan, mainly driven by a 177% increase in brand milk sales. However, revenue for the first half of 2015 accounted for only 40% of our full-year forecast; it fell short of expectations, mainly because it is usually affected by seasonal factors, and revenue for the first half of the year only accounted for 45% of annual revenue. Due to oversupply in the industry, the growth rate of raw milk sales was lower than expected. Due to falling milk prices, gross margin fell 3 percentage points to 46%. Price promotions for branded milk have led to poor gross margins, which are below our expectations. The operating profit margin narrowed by 5.6 percentage points to 37.3%, mainly due to the narrowing of gross margin and the high cost of branded milk business. Net profit increased 20% to 334 million yuan, accounting for 35% of our full-year forecast, which was also lower than expected, mainly due to lower revenue and gross margin. Business prospects: 1) External sales volume, including organic and non-organic milk, is expected to be mediocre in the future. Organic raw milk production is expected to increase by 30% each year; 2) Two new brands of milk products, organic children's yogurt and organic sea buckthorn yogurt, will be launched in the second half of the year; 3) Channel development: Shengmu has penetrated 95% of the country's 17,000 supermarkets and more than 30,000 convenience stores. Management anticipates that more than 100,000 convenience stores will have been established by October 2015. In the long run, the contribution of convenience stores to sales will increase from the current 30% to 50%. Management mentioned that convenience stores are growing faster and are more cost effective; their costs are about 10% lower than modern channels. Adjust profit forecasts. Due to sluggish demand for raw milk, we have lowered our 2015-17 revenue forecast by 14-25% to reflect the lower sales forecast for organic raw milk. At the same time, we have also lowered our gross margin forecast to reflect the decline in the gross margin of branded milk under fierce market competition. As a result, we lowered our net profit forecast by 13-33%. The main risks faced by ratings management execution; food safety issues; low liquidity. The valuation of the stock currently corresponds to 9 times the expected price-earnings ratio in 2016, while the valuation of Hyundai Animal Husbandry (1117.HK/HK$2.02, buy) is 12 times. Due to lower profit forecasts and lower liquidity, we lowered our target price from HK$2.66 to HK$2.37, corresponding to 13 times the expected price-earnings ratio in 2016 (6.4 times for raw milk, 14.4 times for branded milk).