Matters: Deli Co., Ltd. released its 2013 mid-year report, achieving operating income of 430 million yuan, an increase of 34% over the previous year; net profit attributable to shareholders of listed companies of 70 million, an increase of 132% over the previous year, EPS of 0.20 yuan, in line with the forecast range of 130% to 160% year-on-year growth in the company's quarterly report. The company expects net profit from 1Q to 3Q to increase 25% to 45% year on year in 2013, and the corresponding 3Q13 net profit growth rate is -74% to -36% year on year. Ping An's view: High growth continued in the first half of the year: the company's revenue and net profit increased by 34% and 132%, respectively, and gross margin increased by 7 percentage points year-on-year during the reporting period. The high growth was mainly driven by product structure upgrades and sales channel expansion. Product structure upgrade: The products involved in 35,000 high-end glass projects and technical improvement projects are gradually put on the market; the Chuzhou Crystal Cup was ignited as scheduled and is in the product offline commissioning stage, and it is expected that 4q will be officially put into production. Expansion of sales channels: The KA system has signed contracts with more than 1,300 stores in the first half of the year, and is currently in the product delivery period; the distribution network continues to deepen to the city and county levels. 3Q performance may be under pressure: According to the company's net profit growth forecast for 1Q to 3Q in 2013, the 3Q single-quarter net profit growth rate was -74% to -36% year-on-year. Based on KA channel expenses and Chuzhou project depreciation, 3Q performance may be under pressure. During the reporting period, the company's sales expenses were reduced by 8% year over year while expanding its channels. On the one hand, the company's expenses were well controlled. On the other hand, the KA channel entered the centralized product distribution period in the second half of the year, and one-time entry costs such as bar code fees will be reflected starting in 3Q13. The Chuzhou project may begin to accrue depreciation in the 3rd quarter. In a situation where the project has not yet reached a normal profit situation, accruing depreciation puts pressure on the performance of a single quarter. Profit forecasts and valuation take into account that the entry fee for the KA system may be higher than our previous expectations, and that the depreciation cost for the Chuzhou project was earlier than our previous expectations. The 13-year EPS was slightly lowered from 0.37 yuan to 0.34 yuan (after dilution), maintaining the performance forecasts of 0.57 and 0.75 yuan (after dilution) of EPS for the year 14 and 15, respectively, corresponding to the closing price of 16.41 yuan on August 23, 2013. PE was 48.6, 28.9, and 21.9 times, respectively 。 The company's product structure upgrade is being carried out in an orderly manner, and will take the lead in achieving import substitution with domestic peers, sharing the high yield of the high-end daily-use glassware market and the growth space brought about by consumption upgrades. The long-term growth is promising, and the “recommended” rating is maintained. Risk warning: The progress of structural upgrades is below expectations, fluctuations in raw materials and fuel prices, and changes in market style.