The company released its 2014 semi-annual report on August 16. During the reporting period, we achieved operating income of 3,937 billion yuan, a year-on-year decrease of 3.01%; total profit of 155 million yuan, an increase of 13.79%; and net profit of 119 million yuan, an increase of 7.48% year-on-year, after deducting non-net profit of 113 million yuan, an increase of 2.59% year-on-year. In the first half of 2014, the company's diluted earnings per share were 0.35 yuan, return on net assets was 5.22%; operating cash flow per share was -0.32 yuan. The company also disclosed its operating forecast for January to September 2014: net profit attributable to 2014 is expected to increase by 0-20% year-on-year, corresponding to net profit of 151.29 million yuan in the first three quarters of 2013. The net profit range for the first three quarters of 2014 is [151.29 million yuan, 181.55 million yuan], and the EPS range is [0.44 yuan, 0.53 yuan]. Brief review and investment advice. The company's revenue for the first half of the year was 3,937 billion yuan, down 3.01% year on year, down 2.47% and 3.57% respectively in the first and second quarters. Among them, revenue within Guangzhou fell by 1.32%, and total revenue from within and outside the province fell by 8.4%, indicating that the company faced weak consumption situation and competitive pressure in the first half of the year. At the same time, the company closed its Wuhan store in June 2013, which also led to a decrease of 38.78 million yuan in revenue compared to the same period in 2013. The company's gross margin decreased by 0.94 percentage points year on year to 18.44% during the reporting period, mainly due to the 1.08 percentage point drop in gross margin of stores in Guangzhou. Under the unfavorable consumption situation, the company strictly controlled expenses during the reporting period, and the main expenses and expense ratios all declined. Sales expenses decreased by 51.79 million yuan over the same period last year, and the expense ratio decreased by 0.92 percentage points. Among them, the amount of expenses such as depreciation and amortization, utilities, rent, and advertising all fell, while employee remuneration increased only slightly by 2.46%; management expenses only increased slightly by 1.97 million yuan, and the cost ratio increased slightly by 0.09 percentage points; financial expenses of 1.06 million yuan in the first half of 2014 also decreased by 5.85 million yuan compared to the same period last year. The overall cost rate for the period was 13.37%, a year-on-year decrease of 0.97 percentage points. Due to cost savings and a decline in gross margin, the company's operating profit for the first half of the year was 14.43 million yuan, a slight decrease of 1.28% over the previous year. During the reporting period, the company obtained investment income of 14.64 million yuan, increasing its non-operating income by 21.16 million yuan compared with the same period in 2013. This led to a 13.79% increase in the company's total profit and a net profit of 119 million yuan, an increase of 7.48% over the previous year. Among the main subsidiaries: Guangbai Xinyicheng's revenue was 210 million yuan, down 13.7% year on year, and net profit of 29.44 million yuan, down 4.22% year on year; Guangbai Microfinance (the company and subsidiaries invested 90 million yuan, accounting for 30%) achieved revenue of 28.32 million yuan and net profit of 15.49 million yuan in the first half of 2014, which is relatively good. Judgment of the company. (A) Looking ahead to 2014-15, the company's performance is expected to maintain steady growth of 5-10% as the economic environment stabilizes, company showrooms slow down, and microfinance contributes to investment returns. (B) The Guangzhou Municipal State-owned Assets Administration Commission holds 54.18% of the company's shares through the Guangbai Group. If Guangzhou's state-owned assets reform breaks through, it is expected that companies in competitive fields will become targets for promotion and achieve performance improvements after optimizing the governance incentive structure. Update profit forecasts. The net profit attributable to the company in 2014-2016 is estimated to be 2.37, 2.55 and 277 million yuan, respectively, up 6.6%, 7.8% and 8.7% year-on-year, corresponding to EPS of 0.69, 0.75 and 0.81 yuan. The company's current stock price is 9.35 yuan, corresponding to the 2014-15 PE of 13.5, 12.5 and 11.5 times; the company's current market value is 3.2 billion yuan, which corresponds to our estimated revenue of 8.3 billion yuan in 2014, and PS is 0.4 times the industry average. A six-month target price of 10.35 yuan (corresponding to 15 times PE in 2014) was given to maintain the “gain” rating. Risk and uncertainty. The regional consumption environment is still sluggish, and competitive pressure is increasing; the results of new business expansion and business transformation are below expectations; if the company develops unconventional stores, it will break the match between revenue and expenses, causing greater short-term cost pressure.