The company's performance was in line with expectations Huafeng Microfiber announced 2017 results: operating income of 1 billion yuan, an increase of 59.75% over the previous year; net profit attributable to the parent company of 86 million yuan, an increase of 96.19% over the previous year, corresponding to a profit of 0.14 yuan per share. The commencement of production at the Qidong plant is the main reason for the increase in performance. At the same time, Weifutong has successfully completed industrial and commercial changes. Consolidated statements will be made in the second half of the year. The company's performance will continue to grow rapidly, but considering that the stock price has fully reflected performance expectations, it remains neutral for the time being. Trend flow and growth are compounded by value-added business, and the certainty of Weifutong's future performance is guaranteed. (1) Weifutong achieved revenue of 171 million yuan and net profit of 88 million yuan in the first half of the year. The transaction flow is 13 times that of the same period last year (about 270 to 300 billion yuan according to calculations). The average daily transaction volume and number of transactions reached 3 billion yuan and 20 million. The transaction flow for July is expected to be between 85 billion and 90 billion yuan. We estimate the annual transaction flow to be around 800 to 900 billion dollars. (2) In terms of cooperative banks: A total of 90 banks have signed contracts, making breakthroughs in cooperation with major state-owned banks such as CCB and the Postbank. The head office has signed new contracts with three joint stock banks, CMB, Ping An, and Bohai (12 joint stock banks have signed 8 contracts). (3) Merchants side: The number of merchants has exceeded 8 million, and vertical solutions for new retail, property, insurance, footwear and other industries have been formed. (4) In terms of transaction structure: Bank direct customer development models have gradually become mainstream, and the proportion of Weifutong's recommendation and self-development models has gradually declined. It is estimated that the WeChat portion of the corporate banking model's flow will account for more than 60% of the WeChat and bank channels, and the Alipay channel portion of the banking model will also rise rapidly. (5) In terms of rates: The bank model direct expansion model rate is stable at around 0.02%, and there is limited room for decline. It is already difficult for newcomers to profit from this business, which invisibly creates a strong barrier for the company. (6) In terms of value-added services: The company actively expands businesses such as electronic prepaid cards, cross-border payments, and tax refund services, and leverages its massive customer base to explore the value of services other than payment. The profit forecast takes into account that the company completed the transfer of its account to Weiftong on June 23. We have taken into account Weifutong's future performance and raised the profit forecast. Net profit attributable to 2017/2018 is expected to be 277/481 million yuan, up 175.6%/73.7% year on year, and fully diluted EPS is 0.44/0.76 yuan, an increase of 12.31%/43.53%. Valuation and recommendations Currently, the company's stock price corresponds to 2018e P/E 33x. According to the segmented valuation method, the microfiber business and mobile payment business were given price-earnings ratios of 30 times and 45 times, respectively. The corresponding valuation for 2018e was 17.58 billion yuan. Therefore, the target price was raised by 2.62% to 27.86 yuan, which is 9.81% higher than the current stock price. Considering that the current stock price fully reflects the valuation level, we will maintain a neutral rating for the time being. Risks (1) the price of microfiber products is falling rapidly; (2) changes in mobile payment market policy.