Revenue increased 3.78%, net profit increased 32.69%, and Q3 single-quarter revenue fell. From January to September 2016, the company achieved operating income of 2,724 million yuan, an increase of 3.78% over the previous year, net profit of 236 million yuan, an increase of 32.69% over the previous year; net profit after deducting 182 million yuan, an increase of 40.82% over the previous year, and EPS of 0.73 yuan. Net profit growth is greater than revenue mainly due to rising gross margin; 40% of the remaining shares of the subsidiary Lianfa Thermal Power began merging in August last year; subsidiaries Lianfa Tianxiang Printing and Dyeing, and Lianfa Lingcai gradually reduced losses; increased exchange earnings from RMB depreciation contributed to a reduction in financial expenses, and increased investment income from entrusted loans; the increase in net profit after deducting non-net profit was mainly due to government subsidies and corresponding reduction in investment income. In 16Q3, revenue fell 6.26%, and net profit increased by 46.08%. On a quarterly basis, revenue from 15Q1-16Q2 increased by 4.10%, 9.14%, 2.57%, -5.11%, 10.88%, and 7.66% respectively, while net profit increased by 5.25%, 4.68%, -2.97%, -9.99%, 25.94%, and 25.63%, respectively. The decline in revenue in 16Q3 was mainly due to a decrease in the number of orders for yarn-dyed fabrics due to the economic slowdown in Europe and the US. The year-on-year increase in net profit mainly benefited from the increase in gross margin and the increase in exchange profit and loss under the depreciation of the RMB. Gross margin increased, expense ratio decreased, Q3 beneficiary exchange rate depreciation, gross margin increased 4.44PCT from January to September 2016, the company's gross margin rose 1.65PCT to 21.35%, benefiting from improved efficiency in the company's internal management. Among them, Q3 benefited from the depreciation of the RMB exchange rate was quite obvious, and there was an increase after the order price was converted to RMB. The 15Q1-16Q3 gross margin was 18.73% (+1.07PCT), 20.60% (-0.09PCT), 19.63% (-0.61PCT), 23.44% (+0.08PCT), 19.10% (+0.37PCT), 20.97% (+0.37PCT), and 24.07% (+4.44PCT). The cost rate for the period from January to September '16 fell by 0.45 PCT to 11.01%, of which the sales expenses rate decreased by 0.23PCT to 4.67%, the management expenses rate increased by 0.41 PCT to 4.66%, and the financial expenses rate decreased by 0.63 PCT to 1.67%. The sales, management and financial expense ratios for 2016 Q3 were 4.87%, 6.17%, and 1.19%, respectively, down 0.35 PCT, up 1.15 PCT, and 0.62 PCT, respectively. Overseas production capacity continues to be released, and the benefits of the devaluation of the renminbi are clearly accompanied by the continuous rise in domestic labor costs. The company is actively adapting to the trend of industrial transfer and gradually shifting production capacity to low-cost Southeast Asian countries. The company has successively invested (acquired) in Lianfa Garment (Cambodia) Company, AMM Garment (Cambodia) Company, and Lianfa Hengyu (Cambodia) Garment Company, and plans to transfer Lianfa Garment's production capacity to Lianfa Hengyu. Currently, the company's AMM garment production capacity is operating at full capacity, while Lianfa Hengyu's production capacity utilization rate is 50 to 60%. It is expected that full production will be achieved next year. Furthermore, since the African region is rich in labor resources, has low production costs for raw materials, land, etc., and enjoys certain preferential tariffs, Ethiopia will be a region where companies will focus their production capacity layout in the future. The company's products are mainly exported (about 70% of exports in 15 years), export orders are mainly settled in US dollars, and large-scale imported equipment is mainly settled in foreign currencies such as Japanese yen, US dollars, and euros. Since the foreign exchange reform in August 2015, the renminbi has continued to depreciate against the US dollar, and fell below the 6.7 mark on October 10, 2016. The exchange rate hit a new low of nearly six years. As of November 1, the central price of RMB against the US dollar was 6.7734, and it has accumulated depreciation of 4.15% since the beginning of the year. The depreciation of the RMB will have a positive impact on the company's product exports and exchange profit and loss: 1) In the short term, the company will benefit from the depreciation of the RMB to the increase in gross margin due to order price locking in order prices; 2) on the exchange side, since the company's US dollar receivables account period is generally 1-3 months, it will directly generate exchange income; 3) in the long run, the cost of similar international products has declined, and product competitiveness has improved. The direction of the layout and investment companies in the field of environmental protection and new energy is clear. It is worth looking forward to in 2015.4. The company announced the establishment of a wholly-owned subsidiary, Shanghai Chongshan Investment Company, with a registered capital of 200 million yuan. Currently, the main investment directions include major consumer categories, medical devices, and healthcare. Mainly because these investment directions do not have a ceiling on the scale of production capacity, there is plenty of room for development. Currently, the company is still searching for targets, mainly focusing on the profitability of the project, the certainty of development prospects, and valuation. Initially, targets with certain performance and management team experience will be considered. The company will provide financial support and help the company achieve rapid penetration into emerging industries and find other excellent targets through investment in this target. In 2015.8, the company acquired the remaining 40% of the shares of the subsidiary Lianfa Thermal Power and became a wholly-owned subsidiary; in August 2016, the subsidiary Lianfa Thermal Power changed its name to “Lianfa Environmental New Energy”, and will continue to expand in the field of environmentally friendly new energy in the future. The company has its own supporting facilities for heat, electricity and sewage treatment, and is particularly good in cost control, management and operation in sewage treatment. In the future, the company will make full use of its capital, talents, and technical advantages to carry out diversified development in terms of environmental protection (sewage treatment, solid waste) and new energy (biomass power generation, photovoltaic power generation, etc.). Currently, the 3MW distributed photovoltaic power generation project built by the company itself is being implemented. It has already been put into operation in early October, and the operation situation is quite ideal. Performance growth was driven by multiple factors such as the devaluation of the RMB, loss reduction of subsidiaries, consolidation of thermal power companies, and internal management improvements. Maintaining the “buy” rating, companies expect net profit to increase by 15% to 35% in 2016. Mainly due to the improvement in the overall management level of the enterprise, the reduction in costs, and the acquisition of the remaining 40% of Lianfa Environmental New Energy's shares contributed profit. The subsidiaries Lianfa Tianxiang Printing and Dyeing and Lianfa Lingling have gradually reduced losses and are export-oriented to benefit from the devaluation of the RMB. We believe: 1) The RMB has continued to depreciate since the first three quarters of this year, affected by the rising risk of Brexit, the sharp rise in the US dollar index in anticipation of the Fed's interest rate hike at the end of the year, and the trend in depreciation of the RMB exchange rate in the later stages is quite clear. The company's products are mainly exports, and are expected to benefit from the increase in order revenue, exchange earnings, and long-term product international competitiveness brought about by the devaluation of the RMB; 2) On the revenue side, the company's revenue has been growing steadily in recent years, but 16Q3 was affected by weak international demand, and orders for yarn-dyed cloth, the main product, have declined, leading to a decline in revenue in the single quarter in Q3. It is expected that in the short term, the company will still be under some pressure on order volume in the context of poor demand; 3) On the net profit side, as the company's refined management of cost control increases, and the cost control of the RMB has increased. exchange rate The depreciation gross margin is expected to continue to rise. The self-owned brands are still in the start-up phase, small in scale, and have limited performance contributions (fabric brands have grown more than 10% and are developing well, shirt brands are in a transition period from self-operation to franchise, and short-term performance is still under pressure). The subsidiary Lianfa Environmental Renewable Energy's remaining 40% of shares began to be consolidated in September last year and contributed eight months of profit growth this year. Subsidiaries Lianfa Lingcai and Tianxiang Home Textiles each lost about 20 million yuan last year. Losses were reduced this year, and multiple factors drove net profit performance to be better than revenue. 4) Chongshan Investment Company and Lianfa Environmental Renewable Energy have extended expectations as transformation operators, and are expected to become new profit growth points for the company; at the end of September 2016, the company had an account capital of about 1.2 billion yuan (460 million yuan in monetary capital plus nearly 800 million in other current assets for wealth management products, etc.), with a current market value of 5.9 billion yuan, with a certain margin of safety. 5) In August, the company introduced the “Long-term Incentive Fund Management Measures” (plans to extract 30% within the current year's net profit increase of 100 million yuan, and 20% of the portion above 100 million yuan) to attract and motivate senior managers and core key talents, which is conducive to the long-term stable development of performance. We are optimistic that the company will benefit from the growth in performance under the depreciation of the renminbi, and at the same time, the company still has expectations of extending mergers and acquisitions in the environmental protection and renewable energy secondary sector. Considering that the company is clearly benefiting from the depreciation trend of the RMB exchange rate, it is expected that subsequent gross margin will continue to rise steadily. The EPS for 16-18 was 1.13, 1.28, and 1.44 yuan, corresponding to the 2016 PE 16 times. The valuation is low, and there are future transformation expectations, maintaining a “buy” rating. Risk warning: risk of exchange rate fluctuations, risk of falling overseas demand.