Key points of investment

Last week's market performance: The Trade and Retail (CITIC) Index rose 0.18%, outperforming the Shanghai and Shenzhen 300 Index by 0.05 percentage points. Since the beginning of the year, the trade and retail sector has fallen by 12.02%, outperforming the Shanghai and Shenzhen 300 Index by 32.97 percentage points. In the sub-sector, the supermarket index rose 4.50%, the chain index rose 0.20%, the department store index fell 0.95%, and the trade index fell 0.95%. Compared to this week's Shanghai and Shenzhen 300, which rose 0.13%, and the SME index fell 1.32%, the overall performance of the trade and retail sector was good. The top five individual stock gains were Sanjiang Shopping, Happy Shopping, Yonghui Supermarkets, Hongqi Chain, and Central Shopping Mall. Individual stocks rose 10.21%, 9.85%, 9.03%, 8.33%, and 8.15% respectively; the top five declines were International Medicine, Guangzhou Friendship, Shanghai Commodity Trade, Guanfu, and Oriental Entrepreneurship, which fell 6.20%, 6.68%, 6.91%, 7.23%, and 8.28% respectively.

This week's top recommended company: Suning Yunshang: Q3 data growth is beautiful, and the dual-line model is optimal and continuously verified.

The two-tier model had the best experience and efficiency. Retail turned a loss into a profit, and profit increased month-on-month. Backed by Ali, the financial business welcomed an increase in volume. The target price was 19.61 yuan, maintaining the “buy” rating. Suning Yunshang will increase its revenue base through offline Suning Cloud Store/Tesco Service Stations, etc., use differentiated products/high-quality services to raise gross margin levels, strengthen operations online, and strengthen price advantages in similar categories with competitors. The high-quality logistics resources of Suning and Tiantian Express will be fully opened up after connecting with Ali, which will contribute significant revenue. At the same time, the Group's comprehensive financial layout will accelerate transaction volume growth. In 2017-2019, the company is expected to achieve operating income of 1845.23/2263.96/284.616 billion yuan, up 24.19%/22.69%/25.72% year on year; net profit attributable to parent company is 9.44, 19.48, and 4.531 billion yuan, up 34.03%/106.30%/132.63% year on year.

Yonghui supermarket: Q3 revenue and net profit accelerated month-on-month, and technology went hand in hand with new business formats, entering a new growth channel. Yonghui Supermarket's own system innovation promotes efficiency improvement through horse racing system and partner system, and then enhances user experience through iteration of new business formats. Overall, based on the company's strong supply chain system, the company continues to promote new business formats, such as superspecies and Yonghui Life. The company's director resigned and actively introduced technological talents, which helped the company embrace new retail with a larger mindset. Based on endogenous growth, we expect the company to achieve operating income of 583.95/697.85/83/83.93 billion yuan in 2017-2019. The year-on-year increase was 18.61%/19.50%/20.36%, and the realized net profit was 18.57/24.90/3.119 billion yuan, a year-on-year increase of 49.58%/34.01%/25.29%. Considering the company's future development space and supply chain capabilities, and actively embracing new changes, a valuation of 50 times 2018 was given. The corresponding target market value was 124.5 billion yuan, the target price was 13.01 yuan, and a “buy” rating.