Announcement: the company's senior management and middle-level backbone plan to collectively increase their holdings of the company's shares in the next 2 months. According to the company announcement, a total of 13 core executive teams, including Chairman Wang limin and Director Bo Fangming (Chairman of the Group), plan to purchase shares in the company through the Shanghai Securities Exchange system within two months from December 16, 2013, based on their confidence in the company's current development and future sustainable development prospects, with a total of no less than 1.226 million shares. At the same time, a total of 32 middle-level backbones of the company also issued a written notice that they planned to buy no less than 541000 shares through the secondary market within two months, with a lock-up period of six months after the end of the purchase.

After the equity mechanism is straightened out, the middle and senior managers of state-owned enterprises collectively increase their holdings, demonstrating their confidence in the future development of the company, which is consistent with the interests of shareholders, which is conducive to the long-term development of the company. The company is a state-owned textile enterprise in Shandong Province. Ten years after listing, the infighting between major shareholders and two shareholders affected the company's performance. Huacheng, the former major shareholder, went bankrupt in 2011. At present, the largest shareholder is Binyin Group, which is owned by Binzhou State-owned assets Supervision and Administration Commission of Shandong Province, holding 20.82% of the shares. The company divested its lossmaking assets in 2012, bid farewell to historical baggage, ushered in a performance inflection point in 2013, and had promising prospects for the next three years. The large-scale increase of management holdings of listed companies also demonstrated their confidence in the company. Previously, the management of the company did not hold shares, this plan to increase the holding of a total of 1.767 million shares, which will cost about 7 million yuan. According to our calculation, the average cost of senior executives is 370000 yuan, and that of middle-level backbones is 67000 yuan, which is equivalent to one year's salary, which will have a strong incentive effect on the management of the company.

With the printing and dyeing business as the core, the industrial chain extends upstream and downstream, and the grand plan for future development has been realized. The company's 2012 revenue reached 2.154 billion yuan, but its net profit was only 8.29 million. In the future, we expect that Huafang shares will make concerted efforts to expand and strengthen the company's main business around printing and dyeing to the upstream and downstream of the industrial chain. The company's main printing and dyeing business to export-oriented in the industry has a good reputation and reputation, leading technology, excellent quality, stable customers, outstanding core competitiveness. At the same time, relying on its strong technical advantages and production strength, Huafang strives to create its own home textile brands "Blue Platinum" and "Xiao Ni". The company's fixed increase project has been approved, with a base price of 3.74 yuan, and plans to issue 110 million shares to raise no more than 400 million yuan (89 million contributed by major shareholders with land assets) to acquire Yaguang Industrial Park, build yarn and home textile base. In the future, the company's industrial chain will be extended to enhance competitiveness.

This management increase demonstrates confidence in development. We believe that the company has cast off the historical burden and has great potential for internal efficiency improvement. The fixed growth project is expected to promote the expansion of the industrial chain and open up the development space. At present, the market capitalization is only 1.2 billion yuan. It is worth paying attention to and maintaining the rating of increasing holdings. We maintain the forecast of EPS for 13-15 years as 0.05 / 0.10 / 0.26 yuan (EPS is 0.04 / 0.07 / 0.19 yuan after dilution). The company's current performance inflection point is 0.6 times PEG. The incentive for the reform of state-owned enterprises should be expected first.