Same-store sales continue to improve, and the Mid-Autumn Festival data are ideal:

In the first half of the year, the company recorded operating income of 740 million yuan, an increase of 9.6% over the same period last year, and net profit of 578000 yuan, down 98.2% from the same period last year. The company's overall same-store sales fell 4.3% in the first quarter and became regular in the second quarter compared with the same period last year, with an increase of 1.1% in July and August. The same store in July and August was better than in the second quarter, and the two Zhongnan restaurants increased by 3.1% compared with the same store. Judging from the previous teleconference, the same-store growth of the company on the Mid-Autumn Festival was better, which was also higher than that in August. We believe that the company's Xiaonanguo brand same-store revenue is improving and continuing, which will lead to the improvement of the company's overall profitability in the future, and we maintain confidence in the company's future growth.

Transformation, positioning of mass consumption and business banquets:

Before the public purpose, the transformation of brand positioning is being carried out, from the original "three public consumption"-based government consumption to business banquets and public consumption. The company's income from banquets in the first half of 2014 was 67 million yuan. In the future, the company will pay more attention to the increase in the proportion of mass consumption while stabilizing business banquet consumption, so as to realize the transformation of the company. We believe that in the context of today's consumers paying more attention to social, the company's positioning for mass consumption and business banquets is feasible. At present, the transformation of the company is beginning to achieve results, and business banquets and public consumption have become the mainstream consumption.

Adhere to the multi-brand strategy:

The company will continue to adhere to the multi-brand strategy in the future. Its new brand "Xiaonanguo" has opened its first store and will mainly focus on second-tier cities in the future. Uncle Chase has made a profit of HK $3.4 million in the first half of the year and will focus on dessert in the future. In addition, the company cooperates with Oreno, a Japanese catering company, to launch Japanese French food, Japanese Italian food and Japanese cuisine in China. We believe that the company's development of multi-brand has always been the right choice, because only high-quality brand catering enterprises are suitable for the development of multi-brand, and also meet the needs of diversified choices of consumers in the future.

Maintain the recommended rating with a target price of HK $1.30:

We forecast that the company's EPS in 2014 and 2015 will be 0.02 yuan and 0.05 yuan respectively. With reference to the industry valuation and the improvement of the company's future profitability, we will give the company 20 times PE in 2015, a target price of HK $1.30 and a highly recommended rating.