The company announces its quarterly report for 2017:

Revenue in the first quarter increased by 1.39%, and net profit fell 47.89% compared with the same period last year, lower than expected. In the first quarter of 2017, the company achieved operating income of 278 million yuan, an increase of 1.39% over the same period last year; net profit of 15 million yuan, lower than the forecast of 32 million yuan in the first quarter, down 47.89% from the same period last year; net profit of 6.1905 million yuan, down 67.88% from the same period last year; basic earnings per share were 0.04 yuan, down 48.72% from the same period last year. At the same time, the net cash flow generated by operating activities was-55 million yuan, a decrease of 29 million yuan over the same period last year, mainly due to the increase in payment to suppliers and income tax over the same period last year. The net cash flow generated by investment activities decreased by 1.6514 million yuan compared with the same period last year, mainly due to the increase in the net outflow of entrusted financial management funds from the company using idle funds in the current period compared with the same period last year. During the reporting period, the company purchased a total of 284 million yuan of capital preservation products and money funds, earning an income of 365100 yuan.

The decrease in net profit in the first quarter is mainly due to the loss of Hangzhou Baida Real Estate Co., Ltd. The gross profit margin of sales in the first quarter was 25.86%, and the net profit margin of sales was 5.47%, which decreased by 0.69% and 48.59% respectively compared with the same period last year. The investment income changed from positive to negative, and the loss for the current period was 9.0868 million yuan, down 16.2059 million yuan from the same period last year, mainly due to the increase in the loss of Hangzhou Baida Real Estate Co., Ltd., an associate of the company, over the same period last year, and the corresponding increase in investment losses based on the equity method. At the same time, operating costs increased by 1.64%, sales expenses increased by 9.05%, and administrative expenses and financial expenses decreased by 7.18% and 28.16% respectively compared with the same period last year. The decline in net profit is mainly due to the substantial reduction in investment income, that is, it mainly comes from the substantial loss of Hangzhou Baida Real Estate Co., Ltd.

Xizi international commercial real estate project is in the period of cultivation, and the company is actively looking for great health investment opportunities. By the end of the reporting period, the Xizi International Commercial complex project developed by Hangzhou Baida Real Estate, an important associate with a 30% stake in the company, had sold 63600 square meters of property, with a remaining 47600 square meters for sale. The Xizi International Commercial Real Estate Project was put into operation in the second half of 2016. As the commercial operation of the project is still in the development period, the operating income can not cover depreciation and interest expenses. It is expected that the top 100 real estate companies in Hangzhou will still lose money this year. Affected by this, the company expects a large year-on-year decline in cumulative net profit from January to June 2017. In addition, the company is still in a strategic transition period, and will continue to follow the large health industry to find suitable investment opportunities, and at the same time expand the original commercial and retail industry, pay attention to the large-scale consumption areas related to its own industry, actively look for large-scale, profitable and suitable projects, and explore new business models. At the end of 2016, the shareholders of the International Health and Medical Management Center with 20% of the company's shares were fully funded, and the preparatory work was basically completed.

Downgrade earnings forecast to "neutral" rating. Considering that the Xizi international business project of the associated company has entered a training period, the company will bear corresponding investment losses in the next three years. It is estimated that the company's revenue in 2017-2019 will be 1.318 billion yuan, respectively. The year-on-year growth rate is 4.43%, 9.12% and 8.69%, respectively, and the net profit is 0.390.61 billion yuan (down by 70% and 60%). The corresponding EPS is 0.10 shock 0.16 0.23 yuan, and the corresponding PE is 111-70-48 times, respectively. The profit forecast is downgraded to "neutral" rating.