Net profit fell by 9.68% due to a slight increase in revenue, a decrease in gross margin and an increase in the cost ratio. In the first half of 2015, the company achieved operating income of 989 million yuan, an increase of 1.65% over the previous year, net profit of 36 million yuan, a decrease of 9.68% over the previous year, and an EPS of 0.07 yuan. The growth rate of net profit was lower than that of revenue, mainly due to the decline in gross margin and the increase in the cost ratio for the period. Net profit after deducting non-profit decreased by 20.31% year on year, mainly due to a year-on-year increase in investment income of 15.11 million yuan. Gross margin fell 1.60PCT to 19.23% in the first half of the year, mainly due to the decline in the total volume of printed products with high gross profit and the added value of export products being further squeezed; in the first half of the year, the sales expense ratio fell 0.19PCT to 6.13%, the management fee rate increased 0.41PCT to 8.61%, and the financial expense ratio fell 0.75PCT to -0.73%, mainly due to fluctuations in the exchange rate of the RMB against the US dollar, and net exchange earnings increased significantly year-on-year. On a quarterly basis, 15Q2 revenue and net profit declined by 4.95% and 13.82% respectively. 14Q1-15Q1 revenue growth rates were 1.26%, 9.84%, 15.21%, 15.60%, and 10.44%, respectively; net profit growth rates were -4.33%, 3.88%, 5.01%, -43.48%, and 1.43%, respectively. The devaluation of the renminbi is beneficial to exports. Domestic brands are still in the cultivation period. The company has a complete silk industry chain from cocoon drying to garment production. Sales growth in the first half of the year was mainly due to export contributions. Among them, exports increased 9.62% and domestic sales fell 13.06%. The company accounts for 65% of exports. The depreciation of the RMB is beneficial, but exchange gains and losses and forward settlement gains will be offset. The company currently has three domestic sales brands: “DISETA (mainly offline)” for high-end fashion women's clothing; “Ed Milan”, which specializes in thermal underwear (Italian underwear brand acquired in 2013, officially entered China in 2001, mainly joined offline); and “Golden Three Towers” (mainly online), which focuses on silk clothing. The Nita brand has moved out and operated. In the first half of the year, domestic sales brands achieved a turnover of nearly 70 million yuan, an increase of about 20% over the previous year. Net profit is still in loss, with an estimated loss of more than 20 million yuan in 2015. The company decided to build a new Golden Tower O2O project in July, which has now started operation. Golden Tower e-commerce and the offline physical stores of the Ed Milan brand franchisee have cooperated to establish a “brand alliance experience store”, which will be promoted vigorously in the second half of the year. The diversified layout is progressing gradually. In the future, companies focusing on supply chain finance will carry out diversified layouts outside of their main business starting in 11, including Miao City, microfinance, new energy, etc., but their performance contribution is not significant. It is mainly a trial layout: (1) Seedling City was established as a joint venture in September 11 (currently holding 100% of shares), which mainly deals in the acquisition, sales, and market leasing of mulberry seedlings and other seedlings. Currently, the first phase of investment is still ongoing; (2) In April 2012, Jiaxin Microfinance Company (holding 30% of shares) was established, and net profit for 15 years is expected to be 2000-2000 30 million; (3) The subsidiary acquired 70% of the shares of Golden Silkworm Net Management Co., Ltd. in September '13, and the China Cocoon Silk Exchange Market is its subsidiary; (4) Ningbo Shijie (holding 22.73% of the shares), which was acquired in May '14, mainly produces power lithium batteries, and is still losing money. (5) Participated in CaiTong Securities in December '14. The company will continue to explore diversification in the future and will focus on expanding supply chain finance through fixed growth projects. The majority shareholders own the best private high schools in the region, and the possibility of injection is not ruled out in the future. Cocoon silk market ensures the company's core competitiveness The Chinese cocoon silk market was founded in 1993 and is the most influential professional Internet trading platform in the industry. The online spot turnover in 2014 and January to May 15 was 6.41 billion and 4.133 billion. The trading index “Jiaxing Index” is also a trend indicator of international silk prices. Since Jiaxin Silk achieved increased capital and control over the cocoon silk market, the main business activities have been: 1) Cocoon Silk Market launched a new trading type “silk sheet,” and plans to increase the trading of silk fabrics later; 2) leveraging the qualification advantages of commodity trading companies to provide commodity settlement services for the textile industry other than cocoon silk; 3) providing financing services to supply chain enterprises; and 4) carrying out projects in the field of collaborative commerce. In the future, the cocoon silk market will bring revenue to the company from supply chain financial services, logistics and warehousing, collaborative commerce, and big data system export. The significance of the cocoon silk market to the company is: 1) the cocoon silk market has a high position in the industry, and the Internet trading platform established on this basis has a large room for development; 2) the “Jiaxing Index” has a direct impact on the price of silk in the international market, which helps the company to grasp the price information of cocoon silk raw materials in a timely manner and improve the ability to control raw material costs; 3) It helps the company expand in the silk industry chain, enrich the company's e-commerce types, and promote the transformation and upgrading of the company's main business; 4) It can provide the silk industry with room for appreciation and improvement in future valuations; 5) It can provide the silk industry Innovative and diversified business to discover new profit growth points for the company. Announcing non-public offering, entering the field of supply chain finance, and building O2O on July 23, announced the non-public offering plan. The proposed number of shares to be issued will not exceed 57.2 million shares, the issue price will not exceed 12.06 yuan/share, and the capital raised (excluding issuance fees) will not exceed 660 million yuan for the two projects of supply chain finance (560 million) and “Golden Three Towers” silk apparel O2O (100 million). The lockdown period is 1 year. Cocoon silk industry supply chain finance projects: including cocoon silk industry supply chain management information platform construction (including cocoon silk online trade platform, modern logistics information management system, supply chain financing business platform, e-commerce platform mobile app, network and security support system), construction of a cocoon silk product warehousing and logistics network system (large-scale cocoon silk product distribution warehouses in Jiangsu and Zhejiang, China, Guangxi, Yunnan, Sichuan, and cocoon production areas), establishment of a financial leasing company to carry out warehouse financing and verification warehouse financing services for cocoon silk products. The business model is for the company to gather upstream and downstream enterprises in the silk industry chain through a supply chain management information platform to provide supply chain financing services derived from receivables, advance payment, and inventory financing under commodity transactions for micro, small and medium-sized enterprises participating in the procurement and sale of raw materials products to solve the financing difficulties of corporate customers, mainly including the two models of integrated warehouse financing and confirmed warehouse financing; the profit model will be the collection of financing service fees, storage fees and other related value-added service revenue as the main source of revenue, and is expected to obtain an internal rate of return of 5.21%. Significance: By providing supply chain financing services, the stickiness of silk enterprises to the “silkworm net” will be further strengthened, thus providing opportunities for the company to develop online trade, collaborative trade, logistics services, etc.; relying on the “Golden Silkworm Network” online spot supermarket platform, it can gradually grasp information such as the quality level of upstream enterprises and the quality preferences of downstream enterprises, thus creating favorable conditions for the company to further develop its own trade business and increase new profit advantages; by building a new silkworm net silk mall, it will become the “No. 1 store” for consumers to buy silk products, and through the introduction of a well-known brand in the silk industry, Set up specialty stores and special silk stores, etc., to form a professional online silk store to promote silk consumption. The Golden Tower Silk Apparel O2O project includes five aspects: setting up an offline intelligent experience store, internal OMS order processing system, WMS warehousing and logistics system transformation and upgrading, supply chain transformation and upgrading, brand marketing and promotion, and expanding sales of supporting working capital investment for underpinned goods. It is expected to achieve an internal rate of return of 6.2 per cent. Net profit is expected to be -20% to +30% in January-September. Focusing on the progress of supply chain finance and O2O, the company expects net profit to increase by -20% to +30% year-on-year in January-September 2015. We judge: 1) The main business is stable, the scale of supply chain finance business continues to increase, and the share of performance contribution is gradually rising. Due to the strong seasonality of cocoon production and the high prices of cocoons and raw silk, during the period from spring cocoons in late May to late autumn cocoons, there is strong demand for financing by small and medium-sized enterprises, which will promote performance growth in the second half of the year; 2) RMB depreciation is favorable; 3) The company's assets are mainly composed of five parts: Xinjia Silk Industrial Park, which occupies more than 500 acres of warehouses, accounts for more than 90 acres of cocoons and cocoons, factory areas distributed in various counties Station, old The office building, and the newly completed Jiaxin Silk Plaza, had a decrease in demolition income in 2015 compared to the same period last year, but rental income increased. At the same time, the land acquisition period for these assets was long, so there is still room for appreciation in the later stages. The 2015-2017 EPS forecast was adjusted to 0.14/0.16/0.18 yuan. Relying on its core competitiveness in the cocoon silk market, the company is expanding into supply chain finance, while domestic sales brands are building O2O, so there is room for improvement in subsequent performance. Short-term valuations are too high, increasing ratings. Risk warning: Supply chain finance and O2O business fell short of expectations.