Investment advice We reaffirm our recommendation rating for Guanghui Baoxin. We believe that the company's stock price performance will begin to catch up upward. The reason is that previous stock price performance was not as good as that of comparable companies; stock prices are expected to catch up recently. The stock price of Guanghui Baoxin is significantly lower than that of other H-share car dealers; among them, the company's 20-day rise and fall was 3.6%, while Yongda was 14% and Zhengtong was 28.4%. We believe that the recovery of the entire industry has led to an increase in the valuation of comparable companies, yet the relatively low valuations of companies and the high market expectations for the company's performance in the first half of 2017 are expected to help the company's stock price quickly catch up with comparable companies. BMW accounts for the largest share; the new BMW 5 Series brings high profit flexibility. Baoxin has the largest number of BMW 4S stores, and BMW has the highest penetration rate. The official pricing of the BMW 5 Series is competitive, and BMW's sales volume and gross margin are expected to exceed expectations. We believe that in the second half of 2017, BMW is expected to bring more than expected profit elasticity to Baoxin. The new car sales and after-sales service business are growing strongly, and Guanghui is helping to develop the auto finance business. Benefiting from the luxury car market, Baoxin's new car sales and after-sales service business maintained growth in both sales volume and ASP in the first half of the year, and is expected to further reduce the sales expense ratio. With Guanghui's help, Baoxin's auto finance business is also progressing smoothly, and a breakthrough is expected in the medium to long term. Profit forecasting and valuation We are optimistic about the mutually beneficial and win-win cooperation between Baoxin and Guanghui, which is expected to greatly improve the company's management efficiency. Reiterating the recommendation, the target price was raised by 10% to HK$5.5, corresponding to a price-earnings ratio of 14 times in 2017. Risk The profitability of the BMW 5 Series fell short of expectations.