Incident: The company released an interim report and announced Yongkang Zotye's 2Q17 results. The company's revenue increased 626% in the first half of the year to 5.79 billion yuan, and net profit from the mother's mother increased 495% to 220 million yuan. Comment: 1H17 Zotye sold 106,000 passenger cars, 2Q17 sold 47,000 cars, and revenue of 4.94 billion yuan. In the first half of the year, against the backdrop of an overall decline in the sales industry, Zotye sold 106,000 units, -29% year-on-year, of which 13,000 new energy vehicles were sold, +65% year-on-year. The company achieved 100% control of Zotye Auto in April and completed an additional offering in June. This interim report also reported Zotye's second-quarter results, with revenue of 4.94 billion yuan and net profit of 270 million yuan, of which vehicle revenue was 4.55 billion yuan, ASP was about 96,000 yuan, and gross margin was 18.3%, all up from the 2016 full year level. Furthermore, the company announced a bid for Shanghai Feizhong in September last year, and the equity transfer was completed on March 22 this year. Feizong specializes in stamping parts and welding components, supporting SAIC Volkswagen, SAIC-GM, etc., and also provided an increase in the company's performance growth in the first half of the year. In addition, the company also amortized about 52 million yuan of the assessed value-added portion of Yongkang Zotye's assets in the second quarter. Zotye Auto products focus on the fourth and fifth tier regions, with a strategy that focuses on appearance, configuration, channels, and rapid iteration of the wolf style. The development momentum is good. Zotye's target market is the Tier 4 and 5 region. It is in the early days of automobile popularity, and the number of people owning a thousand people will increase rapidly with economic development. In terms of personalization, Zotye closely follows the trend of SUVs to create models with high looks and rich configurations. In terms of channels, Zotye's distribution system is large-scale and dense. By the end of 2016, there were 919 Tier 1 dealers, 1,700 Tier 2 dealers, and 2,210 after-sales service points. In terms of new products, the wolf style of enterprise makes its products meet demand and are launched quickly. Overall, the company mainly enters the mainstream passenger car market with “cost-effective” products. The Damai X7 and T700 were launched one after another in the first half of the year and are expected to become Zotye's new flagship models. In 2017, they contributed 30,000 and 40,000 respectively, driving annual sales to 300,000 units/ +24%. Positive development and new energy research and development promote the long-term development of the company. The company already has an engineering research institute. In the past, it mainly carried out technology development through cooperation with famous domestic and foreign companies, with the main R&D content of automobiles and key components, and accelerated model launch and cost savings by introducing, digesting, and absorbing core technologies in automobile manufacturing. In the future, the company will establish a matrix relating vehicle performance and components to finally achieve positive vehicle development. Furthermore, the company is an early entrant in the field of new energy vehicles. Development began in 2005, has accumulated complete experience in electric vehicle development and sales over 11 years, and sold 37,000 pure electric vehicles in 2016, accounting for 11% of the market. In the future, the company will continue to invest more in the new energy sector. Through positive development and continuous advancement of new energy research and development, the company is expected to better achieve long-term development. Investment advice: The company's 2017/2018 EPS is expected to be 0.76/1.04 yuan respectively, an increase of 1495%/38% respectively, corresponding to the current PE 15X/11X, maintaining the “buy” rating. Disclosure of potential shareholding information: According to the company's announcement on June 1, 2017, after the company's previous issuance was completed, Tianfeng Zhixin, an agency under the direct investment subsidiary of Tianfeng Securities Co., Ltd., will hold 118,355,151 shares of Jinma shares, accounting for 6.47% of the company's total share capital. Risk warning: Sales of the main power/new model are lower than expected, progress in new energy projects is lower than expected, the company's plans to enhance R&D capabilities have changed, and the transition to positive development is slow.