Performance brief In the first half of 2017, the company achieved operating income, operating profit, and net profit attributable to shareholders of listed companies of 208 million yuan, 19.865 million yuan, and 20.22.5 million yuan respectively, up 15.95%, 2.17% and 13.34% year-on-year respectively. Achieving a fully diluted EPS of 0.08 yuan/share is basically in line with our expectations. The net cash flow from operating activities was -95424 million yuan, lower than the net profit for the same period. On a quarterly basis, the company's Q1/Q2 revenue growth rate was 10.92%/20.27%, respectively, and the growth rate of net profit was 11.62%/15.07%, respectively. Business analysis revenue grew steadily, and profit remained stable. In the first half of the year, the company's revenue continued to grow steadily (+15.95%), and gross margin fell slightly to 26.74% (-0.25pct.). The fee rate for the period decreased by 0.14pct. Among them, the sales expense ratio and the financial expense ratio increased by 0.35pct. and 0.48pct, respectively. The increase in the sales expense ratio is mainly due to an increase in freight, promotion costs, and e-commerce fees. The increase in the financial expense ratio is mainly due to a decrease in interest income and a decrease in exchange earnings; the management fee rate decreased by 0.96 pct... Net profit margin of return of 9.76% (-0.13pct.) Profitability has remained stable for the most part. The musical instrument business has been continuously optimized, and revenue has achieved relatively rapid growth. In the first half of the year, the company actively participated in domestic and international musical instrument exhibitions, international charity events, charity programs, and music tours, etc., effectively increasing brand awareness and expanding brand influence. On the basis of traditional piano manufacturing and sales, the company has increased sales of products such as electroacoustic pianos, guitars, violins, etc., and the overall product structure has been continuously optimized. At the same time, the company follows the trend of Internet sales, actively promotes the simultaneous operation of online e-commerce platforms, and expands sales channels. With the company's triple optimization of the musical instrument business, related sales revenue increased by 16.60% in the first half of the year. Art education is progressing in an orderly manner, supporting projects are being built smoothly, and business will continue to be upgraded in the future. Art education is an important business that the company has continued to promote and develop in recent years. Currently, the smart piano project has launched a “6+1" smart piano classroom product and has entered the promotion period, completing coverage in Heilongjiang, Shanxi, Shaanxi and Jiangsu provinces. The company's smart piano project, combined with unified self-written textbooks, can enable multiple people to sign in to teach online. Currently, the courses are mainly aimed at young children and beginners, and courses for young and old learners will be added in the future. On the other hand, the company will raise capital to build smart pianos and Internet support systems through private distribution, which will not only enhance the manufacturing capacity of smart pianos, but also greatly improve supporting service capabilities for related businesses. We believe that the company's art education business will become a new revenue growth point with the expansion of the annual coverage of new courses and the accelerated layout of channels to achieve rapid expansion of business and the release of smart piano production capacity and the increase in supporting service capabilities. Profit forecasts and investment suggestions There is huge room for development in the domestic art education market. We are optimistic about the deepening implementation of the company's “piano manufacturing+art education” model and the potential for integrated development of flexible private institutions in the art education market. We maintain the company's 2017-2019 EPS forecast of 0.16/0.20/0.26 yuan (three-year CAGR 26.4%), and the corresponding PE score is 87/67/51 times, maintaining the company's “increase in holdings” rating. Risk factors are the impact of imported used pianos, market competition has intensified; raw material prices and labor costs have risen; and the promotion of art education has fallen short of expectations.