Incident: The company issued an announcement that it achieved revenue of 260 million yuan in the first three quarters, a slight increase of 0.42% over the previous year, net profit of 49 million yuan, a decrease of 1.63% over the previous year, and net profit after deduction of 2.6%. The company's overall performance remained steady, with a slight improvement over the first half of the year, in line with previous expectations. The main business remains steady, and the clean-up of channel inventories is nearing completion. There was a lot of inventory in the channel in the early stages. In order to absorb inventory, in these two years, the discount level was greater than in previous years, leading to a decline in gross margin. However, this situation will not continue. The three-quarter report company's gross margin returned to 50.5%, and the net profit margin reached 18.9%, which is higher than that of other garment companies in the same industry. Profitability is expected to continue to increase. In terms of expenses, the sales expense ratio increased 2.6 percentage points over the same period to 18.1%. Mainly, the company began adjusting channels this year to explore new integrated brand stores to break the traditional specialty store model. While taking its own brands as the lead, it also introduced other high-quality and well-known brands and cross-border e-commerce businesses to increase more profit points. By giving full play to capital advantages, the pace of resource integration may accelerate. The company plans to participate in subscribing for shares of the Asia Pacific International Maternal, Infant and Child Industry Fund, and make full use of the industrial resources of overseas teams to introduce high-quality overseas brands and services into the domestic market, expand categories horizontally, form multi-brand clusters, optimize the company's current product structure, mainly clothing and cotton, or introduce various categories such as maternity products, strollers, food, etc., to drive low-frequency high-profit products with immediate demand, and promote mutual flow, and promote the improvement of offline efficiency. Second, the company may also broaden the sales radius through channel cooperation. In addition to the company's existing franchise stores, it can also sell products through partner channels, such as selling company products in parent-child entertainment, early childhood education, etc., or selling products on some online platforms, etc., to form effective channel collaboration and increase the consumer's repurchase rate and conversion rate. We judge that in the future, the company will use the advantages of funds to expand categories and expand, and obtain high-quality mother and child resources from home and abroad. Apart from the consumer goods sector, it is also possible to make progress in various fields such as education, health care, film, television, and entertainment, and build a large mother and child group. Shareholding is concentrated, and there is plenty of cash available. Mr. Lin Haoliang, the chairman of the company, and Ms. Lin Ruowen, the general manager of the company, acted as co-actors. They held 30.3% and 29.9% of the shares respectively, for a total of 60.2% of the shares, with concentrated shares. Currently, the company has more than 500 million yuan in disposable cash and plenty of capital, so the expansion space is imaginable. Profit forecasts and investment advice. The company's 2016-2018 EPS is expected to be 0.35 yuan, 0.39 yuan, and 0.47 yuan respectively. Although PE is high at this stage, considering the company's sub-IPO and huge future room, it maintains an “increase in holdings” rating. Risk warning: risk of terminal downturn and sales falling short of expectations; risk of epitaxial expansion falling short of expectations.