Investment advice: We lowered the company's 13-year profit forecast. After adjustment, the company's 2013-2015 EPS is expected to be 0.10 yuan, 0.17 yuan, and 0.22 yuan respectively. Currently, the corresponding 13-year valuation is as high as 90X. Competition in the industry is intensifying, and rent and labor costs are rigidly rising, eating up the company's profit space. Although the performance in 2013 will improve, we need to continue to pay attention to the company's new store operations and the extent to which the same store's growth rate has recovered in the future. Continue to maintain the company's “neutral” rating. Key points: The company's net profit for the first half of the year increased by 117.56% year on year, and the performance was in line with market expectations. In the first half of '13, the company achieved operating income of 6.5 billion yuan, a year-on-year decrease of 0.84%, net profit attributable to shareholders of listed companies of 10.142 million yuan, an increase of 117.56% over the previous year, earnings per share of 0.025 yuan, and net profit attributable to the parent company after deduction of 265.77 million yuan, an increase of 137.20% over the previous year. The performance was in line with expectations. At the same time, the company expects net profit attributable to the parent company to be 5 million yuan to 20 million yuan in January-September, an increase of 106%-125% over the previous year. The estimated EPS is about 0.013-0.05 yuan. The pressure on the revenue side is still high, and the pace of decline slowed slightly in the second quarter. The decline in the company's revenue in the first half of the year was mainly due to weak consumption and increased competition in the industry, which led to a slowdown in the speed of exhibitors and a sharp decline in the growth rate of same-store growth in advantageous regions. As of the first half of the year, the company has opened 5 new stores, and the total number of stores has reached 124. We expect the company to open about 10 new stores and close 3 stores throughout the year (the company closed 1 store in May, resulting in a loss of about 22.97 million yuan); in terms of the same store growth rate, with the exception of central and northwest China, which had an increase of 7.60% and 4.52%, all other regions experienced negative growth. In particular, the decline in the Shenzhen region was obvious, mainly due to factory relocation, declining floating population, and declining passenger traffic. Strengthen gross margin control, strengthen cost and expense control, and promote high profit growth in the first half of the year. By adjusting the product structure, raising the business grade, reducing ineffective promotions, and abolishing some products with low brand influence, the company promoted an increase of 0.98 percentage points to 20.79 percent over the same period last year. Expense control has had little effect. The company's expense rate for the first half of the year was 19.27%, down 0.65 percentage points from the previous year. Among them, the sales expense ratio fell 0.65 percentage points to 15.68%, and the management expense ratio was 3.70%, down 0.10 percentage points from the previous year. As the company continues to implement various effective cost control measures, we believe there is still room for reduction in the annual cost rate. The risk of corporate debt is low, and the overall cash flow situation is healthy. The balance ratio fell 2.00 percentage points to 53.03%; the current ratio and the fluctuation ratio were 1.40 and 1.05, respectively. The company's book currency capital was 1,497 billion yuan, and operating cash flow per share was 0.54 yuan, a year-on-year decrease of 0.20 yuan. The main reason was that the company purchased 800 million yuan of wealth management products during the reporting period. It is difficult to reach an inflection point in the short term; we need to continue to pay attention to the company's cultivation of new stores and the extent to which the same stores have recovered. In the early stages, due to the rapid expansion of the company's new stores, there was no scale effect in the newly entered regions, and the growth in the performance of the old stores was unable to make up for the losses caused by the new stores. Rents and labor costs rose rigidly, eating up the company's profit space. In response to this, the company has slowed down the pace of opening stores and strengthened the control of gross margin and cost ratios, and is now gradually entering a slow recovery period. However, the company's stores are mainly concentrated in Tier 1 and 2 cities and are mainly hypermarkets. Competition in the industry has intensified and operating costs are high. It remains to be seen whether the company's store operations have substantially improved. We expect that the 2013 performance will improve, but it is difficult to see a significant inflection point. In the future, we need to pay attention to the cultivation situation of the 24 new stores that the company opened in '11 in 2013 and the extent to which the same store's growth rate has recovered. Risk factors: rent increases, investment conditions in new markets, and lower than expected rent levels