Business outlook:

　　 Shandong Ruyi Since the first quarter of this year, the new capacity has started commissioning and trial production since the first quarter of this year. As of the first half of this year, about 300-400 million meters of new capacity will be put into operation, and the order period will be 2 months. It is estimated that the new capacity will be released from the third quarter of this year, and the new capacity will be put into operation by the end of this year or early next year.

Group company successfully acquired in the first half of this year. Japanese brand Operator RENOW has become its controlling shareholder. The company owns more than 20 garment brands, many of which are high-end business clothing brands. The listed company will use this advantage to supply high-end products with cashmere high count yarn products to high-end Japanese brands. Considering the time of supply negotiations and the order period of brand dealers, we expect that the proportion of high-end products will increase significantly next year.

　　 Profit forecast

We expect the company's 10-12 years' EPS to be 0.61, 0.91, and 1.16 yuan respectively. Based on this, we believe that the PE that is 18-22 times the company's price is more reasonable, and the corresponding price range in 2011 is 18.2-22.75 yuan. Considering that the company's share price has increased significantly since our recommendation, the expectations for external economic growth are more pessimistic, as well as the long-term expectation of rising labor costs and RMB appreciation, we downgraded the company's investment rating from "highly recommended" to "recommended".