The company announced its 2016 annual report. Net profit decreased by 32.51% year on year. On the evening of April 21, the company announced its 2016 annual report, achieving annual operating income of 5.380 billion yuan, a year-on-year decrease of 6.62%; realized net profit of 112 million yuan, converted into fully diluted EPS of 0.21 yuan, a year-on-year decrease of 32.51%; and realized net profit of 100 million yuan, a year-on-year decrease of 33.22%. Performance fell short of expectations. Looking at the quarterly split, the company achieved revenue of 1,495 billion yuan in 4Q2016, a year-on-year decrease of 4.20%, a decrease greater than the 3.30% decline in 3Q2016. 4Q2016 achieved net profit of 55 million yuan, a year-on-year decrease of 24.49%, a decrease of less than 42.88% in 3Q2016. The consolidated gross margin decreased by 0.89 percentage points, and the cost ratio for the period increased by 0.55 percentage points. At the end of 2016, the company owned 8 department stores in Beijing (Cuiwei Department Store, Mudanyuan Store, Longde Store, Qinghe Store, Dacheng Road Store, Contemporary Mall Zhongguancun Store, Dingcheng Store, and Ganjiakou Department Store (Qinghe Store closed in early 2017). The company owns its own property with a construction area of about 194,000 square meters, accounting for 48.19% of the total property area. By business format, the revenue of the company's department store/leasing/supermarket business in 2016 was 4,707/ 1.32/ 502 billion yuan, respectively, down 5.67%/22.05%/13.31% from the previous year. In 2016, the company's consolidated gross margin was 20.13%, down 0.89 percentage points from the same period last year. By business format, the gross margin of the company's department store/leasing/supermarket business in 2016 was 19.51%/43.87%/16.26%, respectively, up -0.73/ -10.78/ -0.55 percentage points from the same period last year. In 2016, the company's period expense ratio was 17.20%, up 0.55 percentage points from the same period last year. Among them, the sales/management/finance expense ratio was 13.22%/3.78%/0.20%, respectively, up 0.30/ 0.00/ 0.25 percentage points from the same period last year. High-end consumption is still weak, and short-term performance is under heavy pressure. In 2016, the company promoted the transformation and adjustment of Longdedian to a community living center and Cuiweidian supermarket to a themed food center, and promoted the introduction of catering and entertainment services in stores such as Cuiwei Store and Contemporary Mall. The company's business is still mainly retail. Since the company's stores, Contemporary Mall and Ganjiakou Tower, are positioned as middle and high-end department stores, performance is under heavy pressure due to weak consumption. Furthermore, the company is researching and promoting the integration of consumption of goods and services, and is expanding into service consumption fields such as education and tourism through investment. In July 2016, the company signed a “Cooperative Education Agreement” with Beijing Haiqu State-owned Assets Investment and Management Co., Ltd. and Beijing Daoqin Investment Management Co., Ltd. to jointly invest in the establishment of Beijing Haidian International Education Investment Co., Ltd., with a shareholding ratio of 15%, which is conducive to revitalizing the company's capital. In view of the slow progress of state-owned enterprise reform at present, we believe that it is very unlikely that the company will completely transform the education industry, so investors are advised to make prudent judgments. The profit forecast was adjusted, the target price for six months was adjusted to 10.5 yuan, and many stores owned by the company maintained an increase in holdings rating. Many stores owned by the company were positioned as middle and high-end department stores. Weak consumption put heavy pressure on performance. We adjusted our forecast for the company's fully diluted EPS for 2017-2019 to 0.22/0.22/ 0.22 yuan (previously 0.24/ 0.23/ 0.25 yuan), respectively. We adjusted the company's target price for the next six months to 10.5 yuan to maintain an increase in holdings rating. Risk warning: The macroeconomic growth rate fell short of expectations, and the middle and high-end consumer demand fell short of expectations.