Key investment points: July sales volume established an upward inflection point, and the T700 and electric vehicles performed well. Zotye Auto's sales volume in July was 21,000 units, -4.4% year on year and +3.0% month on month. Combined with June sales volume increasing by more than 40% month on month, it basically established an upward inflection point. Among them, the sales volume of pure electric vehicles was 2,709 units, +29.9% year-on-year. We expect the T700 to sell more than 4,000 units, climbing rapidly, with a steady state sales volume of 10,000 units/month. The model structure upgrade was completed, and the profit during the peak season in the second half of the year was impressive. The company's product structure upgrade has basically been completed. The T600, SR7, and Damai X5 focus on the SUV market in the 80,000 to 120,000 yuan range, the T700, SR9, and Damai X7 focus on the SUV market in the 100,000 to 150,000 yuan range, and the Cloud 100S, E200, and E30 focus on the electric vehicle market. Domestic automobile consumption began to enter a peak season in August, and the withdrawal of the purchase tax will stimulate price-sensitive consumers to buy cars in advance. We expect flagship models such as the T700, SR9, and Damai X7 to increase rapidly, driving a marked improvement in bicycle profits. The company's net profit is expected to exceed 1 billion yuan in the second half of the year. Zotye is rich in new energy products, has obvious channel advantages, and third- and fourth-tier cities lead the sales volume. The price of micro/small pure electric passenger cars is as low as 50,000 to 70,000 yuan (after the subsidy), and the purchase threshold has been significantly lowered. At the same time, the cost of using vehicles has been drastically reduced. We believe that they will replace low-speed electric vehicles and electric tricycles, and the space is vast. Zotye is rich in electric models, and the third to fifth tier cities have channels and market advantages. The cumulative sales volume in the first six months of 2017 was about 13,000 units, with the highest market share for compact cars. The results in the interim report exceeded expectations, and bicycle profits increased dramatically. In April 2017, Zotye Auto reported net profit of 200 to 230 million yuan, +440% to +520% year-on-year, and excluding restructuring expenses of 55 million yuan. Therefore, Zotye Auto's quarterly profit for the second quarter reached 250 million yuan, +25% year-on-year, while sales volume was -30% year-on-year. Net profit for bicycles increased from 2,676 yuan to 5,307 yuan this year. Considering that sales volume in the first half of the year exceeded 100,000 vehicles, we expect Zotye Auto's net profit to exceed 500 million yuan in the first half of the year, and in the second half of the year 100 million yuan. Profit forecasts and investment advice. Zotye completed the product structure upgrade and ushered in a period of rapid development. Electric vehicles continued to be popular, with sales volume estimated at 340,000 and 480,000 units in 17/18. EPS in 17-19 is expected to be 0.91 yuan/1.29 yuan/1.53 yuan respectively, giving dynamic PE in 2017 20 times the average, target price 18.2 yuan, and a “buy” rating. Risk warning: 1. Systemic risk; 2. New car sales are lower than expected.