We estimate that the company's EPS from 2015 to 2016 is 0.09 yuan, 0.10 yuan and 0.10 yuan respectively, and the current share price corresponds to 109x, 99x and 93x respectively. Industry competition intensifies, rent and labor cost rigidity rise, engulfing the company's profit space, although the 2014 performance will continue to improve, but it is difficult to have an obvious inflection point, the follow-up need to continue to pay attention to the company's new store operation and the same store growth recovery. Continue to maintain the company's "neutral" rating.

The company's net profit in the first quarter of 14 years increased by 3.1% compared with the same period last year, and the performance was in line with expectations: the company's operating income from January to March 2014 was 3.419 billion yuan, down 3.6% from the same period last year. The net profit attributed to the shareholders of the listed company was 24.0288 million yuan, up 3.1% from the same period last year, and the earnings per share was 0.06 yuan. After deducting the non-profit, the net profit attributed to the parent company was 20.6037 million yuan, down 0.6% from the same period last year. The performance is in line with expectations. At the same time, the company expects to achieve a net profit of 10.142 million yuan to 15.213 million yuan attributed to the parent company from January to September 2014, an increase of 0% 50% over the same period last year, and the estimated EPS is about 0.025 to 0.038 yuan.

The pressure on the revenue side is still high, with revenue falling 3.6% in the first quarter compared with the same period last year: the decline in corporate revenue is mainly due to the slowdown in the speed of exhibition stores and the sharp decline in same-store growth in advantageous areas due to weak consumption and intensified competition in the industry. By the end of March, the company has opened 2 new stores and the total number of stores has reached 130. We expect that the pace of opening stores for the whole year will still be dominated by steady expansion, with a number of about 10; in terms of the growth rate of the same store, it is judged that it has a small growth in the northwest region, other regions are negative growth, especially in Guangdong.

Strengthen the control of gross profit margin and strengthen the control of costs and expenses: by adjusting the commodity structure, improving the level of operation, reducing invalid promotions, and abolishing some products with low brand influence, the company promoted the comprehensive gross profit margin to increase by 1.46 percentage points to 21.64% compared with the same period last year. In terms of expenses, the company's expense rate during the period was 19.78%, an increase of 1.44% over the same period last year, of which the sales expense rate increased by 0.99% to 15.94%, and the management expense rate increased by 3.82%, an increase of 0.30% over the same period last year. We recommend that we continue to pay attention to the cost control for 14 years, especially the changes in labor and rental costs will become the core factors of the company's profit elasticity.

It is difficult to have an inflection point in the short term, so we should continue to pay attention to the cultivation of the company's new stores and the degree of recovery of the same stores: in the early stage, due to the rapid expansion of the company's new stores, the new entry area did not form a scale effect, and the growth of the performance of the old stores could not make up for the losses caused by the new stores. Rent and labor costs rose rigidly, swallowing up the company's profit space. In this regard, the company slows down the pace of opening stores, strengthens the control of gross profit margin and expense rate, and is now gradually entering a slow recovery period, but the company's stores are mainly concentrated in first-and second-tier cities and are dominated by hypermarkets, with intensified competition in the industry and high operating costs. whether the company's store management has been substantially improved remains to be seen. We expect that after the company turns losses, although the company's performance will continue to improve in the past 14 years, it is difficult to have an obvious inflection point. Follow-up needs to pay attention to the cultivation of the company's 24 new stores opened in 11 years this year and the recovery of the same store's growth rate.

Risk hint: store cultivation in the new area is lower than expected; store opening speed is lower than expected.