Performance was in line with expectations. 1H2016 net profit fell 37.22% year on year. The company announced the 2016 mid-year report results. 1H2016 achieved operating income of 1,964 billion yuan, a year-on-year decrease of 39.99%, and realized net profit attributable to the parent company of 41,7263 million yuan, a year-on-year decrease of 37.22%; net profit after deducting non-recurring profit and loss was 23.135 million yuan, a year-on-year decrease of 44.53%, equivalent to basic EPS of 0.08 yuan and non-EPS of 0.04 yuan, which is basically in line with expectations. Looking at the quarterly split, in 2Q2016, the company achieved operating income of 685 million yuan, a year-on-year decrease of 45.32%, and net profit attributable to the parent company of 136.181 million yuan, a year-on-year decrease of 22.88%. The main business revenue fell 39.99% year on year. Affected by pressure on the gold and jewelry retail market, the company's main business revenue fell 39.99% year on year during the reporting period due to factors such as large fluctuations in gold prices and the backlog of e-commerce on traditional channels. Looking at the main business categories, the revenue of the gold jewelry/platinum jewelry/inlay jewelry/silver (jewelry) /other businesses changed -42.18%/-31.91%/-1.91% /- 1.97%/10.46%/-15.84%, respectively. In order to seek future development space, the company plans to acquire 75% of Haowu China's shares. Previously, it had invested 25% of Haowu China's shares at the end of 2015. The company is an O2O real estate crowdsale platform. The company believes that Haowu China's Internet mentality helps the company promote online jewelry marketing. Gross margin increased 2.14 percentage points year on year, and the period expense ratio increased 2.84 percentage points year on year. The company's comprehensive gross margin during the reporting period was 9.39 percent, up 2.14 percentage points year on year. By category, the gross margin of gold jewelry/platinum jewelry/inlay jewelry/silver (jewelry) items/other business during the reporting period was 7.04%/9.23%/32.04%/28.68%/58.08 percent, respectively, a year-on-year change of 1.36 /3.36/-2.42 /7.76 /- 1.53 percentage points. In terms of the period expense ratio, 1H2016 increased 2.84 percentage points year over year to 7.79%, of which the sales/management/finance expense ratio was 4.34% /1.52 %/ 1.93%, respectively, a year-on-year change of 1.47 /0.58 /0.79 percentage points. Short-term gold and jewelry maintains a cautious view, and long-term optimism: We still maintain the cautious views of companies related to the gold and jewelry industry in the short term. The main reason is that this round of rising gold prices has not boosted the growth of gold and jewelry consumption. According to statistics from the China Business Information Network, in the first half of 2016, the retail sales growth rate of gold, silver and jewellery of the country's 50 major retail enterprises was -20.9%, down from 22.0 percentage points in the same period last year. We think this is mainly due to: 1) the period from 2013 to 2014, when Chinese aunts “grabbed gold” three times, fell exactly between 1,200 and 1,350 US dollars/ounce, and most investors have not yet unresolved; 2) Since the second half of 2015, housing prices in first-tier cities have risen sharply, eroding consumers' demand for optional consumer goods. However, in the long run, the consumption upgrade is beneficial to the consumption of gold and jewellery, and is still optimistic. Upgraded to an increase in holdings rating. The six-month target price is 15 yuan. We maintain the company's 2016-2018 EPS forecast of 0.09/0.13/0.16 yuan respectively, giving the company a target price of 15 yuan for the next six months, corresponding to the price-earnings ratio of 166X in 2016. Considering the future acquisition of Haowu's shares in China, it was upgraded to an increase in holdings rating. Risk warning: The macroeconomic growth rate is declining, and the growth rate of consumer demand is lower than expected.