Investment positives
　　We initiate coverage with a HOLD rating and a TP of HK$7.95,based on 16x 2017e P/E （14% upside）。 It is the wor ld’slargest lingerie-material provider, featuring one-stopsolutions with high-tech and top-quality products.
　　Why a HOLD rating?
　　Lingerie material sector certain to grow. Currentlingerie market trends put elasticity and functionality infocus. Synthetic fabric innovations face strong demand.
　　Thus, capex and R&D are entry barriers.
　　Compet itive advantages. 1） CEO is committed to R&D;investment in R&D has led to higher GPM and market share.
　　2） Strong pricing power. 3） Capacity expansion andeconomies of scale helping improve utilization rate.
　　Growth opportunities in sportswear and lace. In VS,network expansion in China and the possibility of becominga lace customer. In spor ts brands, higher supply portion andcustomer development. Capacity expansion and highercustomer concentration also leads to higher net margin.
　　How do we differ from the marketAs an investment targetin the lingerie industry chain, venturing into the sportswear andlace sector can help generate new growth.
　　Potential catalysts: Client development in sportswear sector.
　　Financials and valuation
　　EPS is expected to be HK$0.41/0.50/0.59 in 2016/17/18, a CAGRof 21%. It has leading R&D advantages and growthcertainty, while its stock price is not cheap for now （14x2017e P/E）。 We suggest investors buy on dips.
　　Risks
　　Slower customer development/capacity expansion.