The performance was in line with expectations. China Cinda announced its 2019 interim results. Total revenue reached 53.3 billion yuan, down 2.7% year on year. Net profit of Yuimu reached 8.69 billion yuan, up 0.8% year on year. Basic earnings per share reached $0.23. The company's traditional net non-performing assets grew 4.5% year on year, 65% year on year in the middle of 2018, and 27% year on year at the end of 2018; the company's net restructured non-performing assets grew at a year-on-year rate of -6.22%, the year-on-year growth rate in the middle of 2018 was 10%, and the year-on-year growth rate at the end of 2018 was 0.3%. The yield on disposal of traditional non-performing assets was 15.9%, 17.4% in mid-2018 and 15.5% in the full year of 2018; the yield on disposal of restructured non-performing assets was 8.5%, 8.1% in mid-2018, and 8.4% for the full year of 2018. The impairment ratio for non-performing assets acquired and restructured by companies in mid-2019 was 2.18%, 2.23% in mid-2018, and 3.13% at the end of 2018; provision coverage was 209%, 210% in mid-2018, and 180% at the end of 2018. The company's core Tier 1 capital adequacy ratio and total capital adequacy ratio stabilized at 10.4% and 16.0% from 10.2% and 16.0% at the end of 2018. The core business is facing challenges. As far as traditional non-performing asset management business is concerned, the downward pressure on the economy will affect the speed and yield of disposal of the company's non-performing assets, which is not conducive to improving its profitability and capital quality, thus limiting its ability to acquire non-performing assets. As far as restructuring non-performing asset management business is concerned, since real estate-related businesses account for a relatively high share, government restrictions on real estate financing and guidance on mortgage interest rates may affect the company's restructured non-performing asset management business. Furthermore, the slowdown in economic growth will further increase asset quality risks and provision pressure. Valuation is under pressure. Following the central bank providing credit enhancement for interbank deposit certificates issued by Bank of Jinzhou by providing credit risk mitigation tools on June 10, the Industrial and Commercial Bank of China Financial Asset Investment Company, Cinda Asset Management Company, and Great Wall Asset Management Company announced the signing of an equity transfer agreement to acquire Bank of Jinzhou shares on July 28. After the transaction was completed, the three institutions collectively owned 25% of the bank's shares, of which Cinda owned 6.49%. Bank of Jinzhou is an urban commercial bank in Liaoning Province with total assets of 748 billion yuan as of the end of the first half of 2018. It failed to disclose its latest financial statements for 2018 due to the resignation of its previous auditor, whereas previously, it had changed auditors three times since May 2018. According to its disclosed results for the first half of 2018, loans to high-risk industries such as manufacturing, mining, and wholesale and retail industries accounted for up to 63% of total loans, while retail loans accounted for only 4% of total loans. This put pressure on its capital strength and capital quality. The non-performing loan ratio and overdue loan ratio were 1.26% and 3%, respectively, and the core Tier 1 capital adequacy ratio was only 7.95%. Although the direct impact of this acquisition on Cinda is minimal, the market is still concerned that the company will continue to participate in the restructuring of the problematic financial institution, thereby suppressing the company's valuation. Downgraded to increase in holdings. We maintain our earnings per share forecast for 2019 at RMB 0.30 (up 3.6% year on year), RMB 0.32 for 2020 (up 5.2% year on year), and RMB 0.34 for 2021 (up 7.3% year on year). Currently, Cinda's stock price corresponds to 0.37 times the 2019 PB. We lowered the company's target PB for 2019 by 0.45 times and lowered the target price from HK$2.58 to HK$1.90. In response to the 19.5% upside, we downgraded our rating to increase our holdings.