Company Overview Established in 2007, Junzhi Group is a leading domestic manufacturer of RF coaxial cables. The company's RF cable product sales volume ranked first in China, with a market share of about 25% in 2012. The products are widely used in the transmission systems of telecom operators, service providers, and main equipment manufacturers. The main customers are the three major domestic operators and telecommunication equipment suppliers such as ZTE and Huawei, and also export to overseas markets. Investment summary Thanks to increased revenue and reduced costs, the company achieved 165 million yuan in the first half of '13, a high growth rate of 29.3% over the previous year. The company has outstanding competitive capabilities in R&D and sales, and it is expected that these advantages will be maintained in the future, helping to solidify the company's leading market share. Capacity expansion rules will support growth. Information consumption has become one of the government's focus points to stimulate the economy. The imminent issuance of a 4G license will bring real demand expansion to companies. It is expected that operators' capital expenditure and investment will accelerate in the second half of '13. The stock placement will bring sufficient cash support to the company's operations and an improvement in the capital structure. According to simple estimates, the company's asset debt ratio is expected to drop by about 5 percentage points on a 1H13 basis. The current valuation of the company is less than 8 times the EPS in '13, which is not in line with its growth potential. We have given the company a provisional target price of HK$4. Compared with the valuation level of earnings per share of about 9.2 times in 2013, there is a premium margin of 18% over the current price, giving it a “buy” rating. A review of the 2013 interim report of Junzhi Collection showed that the company's revenue during the period increased 15.7% year on year to 1.27 billion yuan. Among them, RF coaxial cables increased by 12.5%, accounting for 74%, and the revenue share of new flame retardant flexible cable products increased by 55.4% year on year, and the revenue share had reached 21.1%. Moreover, the company's profitability declined slightly, and overall gross margin narrowed slightly by 0.9 percentage points to 23.4% year-on-year, due to a decrease in the share of large-standard RF coaxial cables with higher gross margins.