The transfer of mature projects leads to a decline in revenue, deducting non-profits and continuing to reduce losses.

Hualian shares released its annual report and quarterly report, with revenue of 1.02 billion in 2016, down 14.7% from the same period last year; net profit attributable to 116 million, down 47.5% from the same period last year; and net loss of 2.26% after deducting non-profit, reducing loss by 170 million compared with the same period last year. The decline in main business revenue is mainly due to the transfer of eight mature projects in the past two years (invigorating assets and recognizing investment income, followed by income in the form of management fees), and the decline in attributable net profit is mainly due to the fact that the main property operation sector has not yet completely reversed its losses. at the same time, property transfer income decreased compared with the same period last year. 1Q2017's revenue was 228 million, down 16% from the same period last year; the attributable net profit was 10.19 million, down 45% from the same period last year; and the non-deductible loss was 41.56 million, reducing the loss by about 31.07 million compared with the same period last year.

In the quarter, 1Q2017 revenue was 228 million, down 16% from the same period last year; net profit from attribution was 10.19 million, down 45% from the same period last year; deducting a non-loss of 41.56 million, reducing losses by about 31.07 million year-on-year, store cultivation led to continued losses in the main business of shopping center operation. The single-quarter comprehensive gross profit margin fell 3.48pp to 35.03% year-on-year, the sales + management expense rate increased 0.56pp to 44.82% year-on-year, and the financial expense rate decreased to 22.55%. Follow-up stores gradually cultivate maturity, fixed increase funds in place to reduce debt financing, the operation of the main shopping center is expected to continue to reduce losses.

The fixed increase has been completed, and we look forward to the acceleration of the follow-up changes.

The company mainly operates community shopping centers, and has more than 40 community shopping centers in operation. At present, the company has determined "platform + content" as the development idea, and plans to strategically invest in related formats of shopping centers such as entertainment, education, catering and so on, so as to strengthen the positioning of one-stop community business centers. In 2016, it cooperated with Yaolai Cinema to develop and operate Hualian Cinema chain (it had 42 screens in 7 cinemas by the end of 16th), and developed cinema operation business. At present, the fixed growth of the company has been officially completed, the introduction of CITIC Industrial Fund as the company's second largest shareholder, the follow-up is expected to dock with the industrial fund quality project.

We expect that the operation of the main shopping center is expected to reduce losses quarter by quarter in 2017, and the main business of the whole year is expected to break even. The company currently has 3.8 billion cash on hand. After docking with the CITIC Industrial Fund, we will actively look for service formats such as cinemas, children's parks, entertainment and high-quality property investment, which will bring new profit growth points for the company, and the pace of follow-up transformation is expected to be accelerated. Taking into account the recognition rhythm of investment income, it is estimated that the attributable net profit for 2017-2019 will be 337 million, respectively, corresponding to the current 60.7/28.1/23.1XPE, maintaining the "buy" rating, waiting for subsequent internal and external changes to be realized.

Risk hint: offline business continues to be in the doldrums; the transformation is not as expected; the progress of expansion is lower than expected