In 2015, H1 sales increased by 39.5% compared with the same period last year, and net profit increased by 2.3% compared with the same period last year: the company's 15-year H1 sales increased by 39.5% year-on-year to HK $3.68 billion, of which 73.7% of the revenue was private brand business, which enabled the company to successfully realize the transformation from OEM manufacturers to brands. In the revenue category, GB's original business, which accounts for 31.4% of revenue, increased 1.8% year-on-year, accounting for 24.6% of revenue; Evenflo brand increased 17.4%, accounting for 15.9% of revenue; and Cybex brand revenue increased 372.5%, accounting for 26.3% of revenue. Blue-chip customers' revenue fell 12.7% year-on-year due to a decline in Dorel orders from their largest customer. Due to the high gross profit margin of the new M & A business, the company's gross profit margin rose 1.3 percentage points year-on-year to 28.6%. However, due to the increase in R & D costs and employee benefits, the company's operating profit rose only 26.1 per cent year-on-year to HK $153 million, while operating profit fell 0.4 percentage points to 4.2 per cent. 64% of the operating profit comes from the Cybex brand, and its operating profit margin is as high as 16.7%. Although the Evenflo brand has successfully turned losses into profits, Evenflo's operating profit margin is still only 1.7%. The operating profit margin of the company's original business is 1.8%. As mergers and acquisitions led to an increase in bank loans and higher tax rates as a result of overseas mergers and acquisitions, the company's net profit rose only 2.3 per cent year-on-year to HK $91.4 million, while profit margins fell 0.9 percentage points to 2.5 per cent. The company currently has a net debt of HK $1.15 billion and does not pay dividends in the medium term.

Future outlook: at present, the company's brands are still mainly regional operations. For example, 73% of the revenue of the GB brand comes from China, 97% of the revenue of the Evenflo brand comes from North America, and 95% of the revenue of the Cybex brand comes from Europe. In the future, the company will make use of its global channel advantage to promote these own brands to the world. At the same time, the company divides many of its own brands into platinum, gold, silver and copper series, giving brands different value positioning for different audiences, and will integrate the advantages of each brand to achieve brand classification and occupation of different segments. In addition, the company is also integrating the industrial chain, closing redundant departments, and gradually reducing costs.

Target price of HK $4.05, maintain buy rating: the company has successfully realized the transformation from OEM manufacturer to brand. From the growth of revenue from the acquisition of brands and the transition from loss to profit, we believe that the company has initially effectively realized the integration of M & A business. We continue to be optimistic about the synergy brought about by brand classification, channel expansion and department integration in the future. The company's original business and Evenflo operating profit margin are only about 1.7%, compared with the industry's excellent competitors average operating profit margin of 8-12%, there is still much room for improvement. We estimate the company's target price at HK $4.05 according to the 15 times PE in 2016, which is 18.5% higher than the current price and maintain the buy rating.

Risk tips: recession, pace of expansion and lower-than-expected cost controls.