Key investment events: The company released its 2016 annual report, achieved revenue of 390 million yuan, an increase of 6% over the previous year, and realized net profit of 72.756 million yuan, an increase of 5.8% over the previous year. It plans to distribute a cash dividend of 1 yuan (tax included) for every 10 shares to all shareholders. Among them, 16Q4 achieved revenue of 130 million yuan, an increase of 19.8% over the previous year, and realized net profit of 236.96 million yuan, an increase of 25.4% over the previous year. At the same time, the company released its 2017 quarterly report, achieving revenue of 89.013 million yuan, an increase of 9.1% over the previous year, and net profit of 17.2% over the previous year. Business strategy adjustments push performance back to a period of growth. The company achieved both revenue and net profit growth, reversing the downward trend since 2015 and confirming our earlier judgment that “inventory clearance is nearing completion, and channel adjustments are already in place”. In 2016, the company's gross margin increased 1.2 percentage points from the previous year to 52.1%, and net profit margin increased 0.3 percentage points to 19.2% from the previous year. The 17Q1 gross margin continued its upward trend, reaching 52.14%. Net profit margin increased to 19.17% from 17.85% in the same period last year, and profitability increased significantly. By product, apparel cotton, daily necessities, and maternity products all recorded positive growth. Among them, clothing cotton (81%), which accounted for the largest share, grew steadily, reaching 3.4%; daily necessities began to gain strength, up 15.4% year on year; it is worth noting that the growth rate of new maternity products reached 56%. Although the current base is low, it may become a new growth point in the future. The double increase in net revenue and profit is mainly driven by the company's adjustment of business strategies: 1) trying to adopt the franchise model and increase investment in the self-operated system. The number of stores opened increased by 77 throughout the year, fully mobilizing the enthusiasm of franchisees; 2) Exploring the brand integrated store model, providing its own brand+high-quality well-known brands and cross-border e-commerce business in terminal stores, rich categories, and rising customer unit prices and customer traffic to drive performance improvement; 3) Strengthen control over procurement costs and enhance the bargaining power of the supply chain. Expand marketing networks, improve product categories, and improve business efficiency. Currently, the company has more than 1,300 offline outlets and has built a nationwide marketing network through the three channels of franchise, self-operation, and distribution, and is also sinking in the third- and fourth-tier cities with relatively developed economies. In terms of online channels, the company launched e-commerce business on platforms such as Tmall, JD, and Vipshop. E-commerce sales performance increased by more than 50% in 2016, and strong collaboration was formed between online and offline channels. As the company integrates brand channel management in '17, marketing efficiency will be further improved. The company has three major brands, “Rabbi,” “Next Generation,” and “Baby Rabbi”, covering different categories and consumer groups. In 2016, the company launched a series of children's clothing products made of natural fiber fabrics and introduced Belle bottles from abroad to improve product categories. At the same time, it also launched the Rabbi Family Bear brand image, created a rabbi creative park, and increased consumers' awareness of the company's brand. While expanding the number of stores horizontally, the company has also strengthened the detailed management of single stores. The company has upgraded the original POS information system, introduced a new system, vertically controlled store sales and inventory conditions, and grasped the best-selling and slow-selling products in real time, greatly improving decision-making efficiency, which is beneficial to the increase in the growth rate of the same store. Benefit from the two-child policy and consumption upgrades, and actively promote the layout of the mother and child ecosystem. In 2016, the number of births in China reached 18.46 million, an increase of more than 1.8 million, a record high since 2000. The implementation of the two-child policy and consumption upgrades will undoubtedly drive a sharp increase in demand for maternal and child consumer goods. As one of the leading domestic mother and child brands, the company will directly benefit from the high growth of the industry. The company participated in subscribing for shares in the Asia Pacific International Maternal, Infant and Child Industry Fund last year, making full use of the industrial resources of overseas teams to introduce high-quality overseas brands and services into the domestic market. We believe that in the future, the company will use the advantages of funds to expand categories and expand, and obtain high-quality maternal 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, form effective collaboration with the main business, and build a large maternal and child group. Profit forecasts and investment advice. The company's 2017-2019 EPS is estimated to be 0.42 yuan, 0.5 yuan, and 0.61 yuan respectively. Considering that the company will directly benefit from the high growth of the maternal and child industry, results are gradually showing in marketing network layout and management adjustments, maintaining the “increased holding” rating. Risk warning: Risk of sales growth falling short of expectations; risk of extension expansion falling short of expectations.