Summary of the report:

Operating income increased by 3.41% over the same period last year, and gross profit margin increased by 1.14 percentage points over the same period last year. In 2016, the operating income reached 6.71 billion yuan, an increase of 3.41% over the same period last year, and the net profit returned to the mother was 54.3836 million yuan, turning losses into profits. The net operating cash flow was 168 million yuan, compared with 88 million yuan in the previous period. The comprehensive gross profit margin was 21.61%, an increase of 1.14 percentage points over the same period last year. In terms of period expenses, the sales expenses were 1.149 billion yuan, down 2.38% from the same period last year; the administrative expenses were 248 million yuan, down 29.75% from the same period last year; and the financial expenses were 21.6463 million yuan, down 9.76% from the same period last year.

The main business covers traditional retail and e-commerce, deeply ploughing Fujian area. During the reporting period, the company continued to operate malls, department stores, supermarkets, shopping centers, sporting goods stores and other traditional retail formats, while actively developing e-commerce. By the end of the reporting period, the company had 133 stores, including 124 supermarkets and 9 department stores. In terms of revenue from the main business, in terms of products, the revenue of fresh / food / daily necessities / department stores is 15.91 billion RMB and gross profit margin is 23.72% 28.99% 17.36% and 23.43% respectively. From a regional point of view, the revenue of southern Fujian / eastern Fujian / western Fujian and northern Fujian / non-provincial areas is respectively 34.45,63,988 million yuan, and the gross profit margin is 51.34% 24.78% 14.72% 4.2% respectively.

Focus on Fujian and Jiangxi market, from "big" to "small" to improve quality and efficiency. During the reporting period, the company focused on the traditional store layout in Fujian and Jiangxi market, and changed to quality and benefit type. Among them, focus on promoting the transformation of shopping malls to shopping centers and community life supermarkets, expanding the "neighborhood gathering" community life supermarket model, and developing supermarket small business formats such as dodo, toot snacks, mother and child life hall, etc., strengthen and enhance the function of serving the community.

Enter the online business on a large scale, and the physical e-commerce goes hand in hand. During the reporting period, the company completed the wholly-owned acquisitions of Jiuai Zhihe, Jiuai Tianjin, Luzhou Zhizhi and three e-commerce operation and service enterprises. It is expected that the three target companies will give full play to the advantages of digital marketing, e-commerce operation and data analysis in the future to help the company enhance the scale of online sales and brand influence. By the end of the reporting period, e-commerce business brought a total of 333 million yuan in revenue, accounting for 4.96% of the total revenue, and there is room for growth. Profit forecast and valuation: from 2017 to 2019, the EPS is expected to be 0.12,0.13,0.16 yuan per share respectively, and the corresponding PE is 70x, 62x and 51x respectively.

Risk hint: store expansion risk; industry competition risk; goodwill impairment risk