Wenfeng Co., Ltd. (601010.CH/RMB 6.94, holding) released the 1Q2014 quarterly report: 1Q2014, the company achieved revenue of 2,317 billion yuan, an increase of 10.04%; net profit attributable to the parent company was 137 million yuan, an increase of 33.48% year on year. The company's net profit after deduction was 136 million yuan, an increase of 36.78% year on year. The fully diluted earnings per share are 0.18 yuan, which is basically in line with our expectations. We maintain the profit forecasts of the company's 2014-2016 earnings of 0.505, 0.530, and 0.567 (we will not make profit forecasts for the time being due to high uncertainty in real estate settlement), using 2013 as a base period with a compound growth rate of 5% for the next three years, and a target price of 7.65 yuan/share for 6 months, corresponding to 15 times the price-earnings ratio in 2014, maintaining our holding rating. Comment: Real estate revenue contributed to a sharp increase of 33.48%. During the reporting period, the company's revenue was 2,317 billion yuan, up 10.04% year on year, and net profit after deduction was 36.78%. The reason is that the company's real estate business revenue in the first quarter was about 100 million yuan, and there was no real estate revenue in the same period last year. After deducting the impact of real estate, retail business revenue increased by about 6%. After deducting the impact of real estate net profit, the net profit of the retail business increased by about 5-10% year on year in the first quarter. The comprehensive gross margin increased 2.21 percentage points year on year, and the cost ratio was basically the same year on year: during the reporting period, the comprehensive gross margin surged 2.21 percentage points year on year. We think the main reason was that there was no real estate revenue in the first quarter. There was no real estate revenue in the same period last year. Real estate gross margin was high, which increased the gross profit margin; the share of gold and jewelry with low gross margin declined. The cost rate increased slightly by 0.07 percentage points year-on-year during the reporting period. Among them, sales/management/finance expense ratios changed 0.06, 0.01, and 0 percentage points year-on-year to 4.64%, 3.29%, and 0.24%, respectively. Valuation We maintain the profit forecasts of the company's 2014-2016 earnings per share of 0.505, 0.530, and 0.567 (we will not make profit forecasts for the time being due to high uncertainty in real estate settlement). Using 2013 as the base period, a compound growth rate of 5% for the next three years and a target price of 7.65 yuan for 6 months, corresponding to 15 times the price-earnings ratio in 2014, we maintain our holding rating.