Incident: The company issued an announcement and signed a “Memorandum of Understanding on Pure Electric Passenger Vehicle Business Cooperation” with Ford Motor Company to jointly establish a Sino-foreign joint venture independent brand pure electric passenger vehicle manufacturer integrating R&D, procurement, manufacturing, sales and service, and mobile mobility. The core idea is to establish a joint venture with Ford, which is expected to achieve a win-win situation. The cooperation between Ford and Zotye is expected, on the one hand, to be influenced by the NEV credit policy; on the other hand, it can gain a certain market share in the domestic NEV market. Ford Motor Company announced its electrification strategy in China in April of this year, announcing that by 2025, 70% of the models sold by the Ford brand in China will provide electric vehicle version options. The company is a leader in the field of small pure electric passenger vehicles in China. Cooperation with Ford Motor Company is conducive to further enhancing the company's R&D capabilities, brand influence and market competitiveness of new energy vehicles. Cycling earnings increased year over year in the second quarter. The company achieved operating income of 5.787 billion yuan in the first half of the year, an increase of 626.5% over the previous year; net profit of 222 million yuan (the company only consolidated Yongkang Zotye Auto's profit for the 2nd quarter), an increase of 495.1% over the previous year. The subsidiary Yongkang Zotye Auto achieved quarterly revenue of 4.941 billion yuan, net profit of 272 million yuan, and a net profit margin of 5.5%, down 0.3 percentage points from 2016. Among them, the vehicle business achieved revenue of 4,548 billion yuan and net profit of 5,719 yuan for bicycles, an increase of 45.7% over 2016. Although overall sales volume was affected by sales of traditional vehicles, bicycle profits increased due to increased demand for electric vehicles. Among them, 13,000 pure electric passenger cars were sold, an increase of 65.4% over the previous year. The company's traditional passenger car sales are expected to pick up in the second half of the year. Electric passenger car sales are expected to continue to grow, and profit is expected to increase month-on-month. In July, the company sold 18,400 traditional passenger cars, an increase of 9.8% over the previous month. The sales volume for April and May this year was 11,300 units, which is expected to be the lowest for the whole year. In July, sales of the main model T600 for traditional passenger cars increased 61.5% month-on-month, and sales of the newly launched model T700 increased 15.0% month-on-month; sales of traditional passenger cars are expected to gradually pick up in the second half of the year. In the first half of the year, the company sold 7,230 and 2,222 electric passenger cars, respectively, achieving year-on-year increases of 157.5% and 257.2%, respectively. It is the main model for sales growth. It is expected that electric vehicle sales will continue to grow in the second half of the year. Financial forecasts and investment recommendations forecast EPS of $0.59, 1.03, and 1.32 yuan for 2017-2019 (considering that the completion of capital raised by issuing shares in the second half of the year is a probable event, the total share capital in this report was estimated at 2,049 billion shares, and the original forecast was 0.79, 1.37, and 1.76 yuan). Referring to comparable companies, the company gave the company an average PE valuation of 21 times in 2017. The target price was 15.75 yuan for the full year of 2017, and the target price was 15.75 yuan, maintaining the buying rating. Risk warning: Sales of SUVs and other models and new energy vehicles fell short of expectations, and the issuance of shares to raise capital failed.