Main points of investment:

In the first three quarters of 2016, revenue increased by 1.69% compared with the same period last year, and net profit increased by 315.40% compared with the same period last year, in line with our expectations. In the first three quarters of 2016, the company achieved operating income of 5.003 billion yuan, an increase of 1.69% over the same period last year, and a net profit of 212 million yuan, an increase of 315.40% over the same period last year. Of which, revenue in the third quarter was 1.608 billion yuan, an increase of 1.44% over the same period last year; and the net profit of returning to the mother was 163 million yuan, an increase of 318.83% over the same period last year, which is in line with our expectations. The main reason for the substantial increase in the company's net profit is that the company gained 189 million yuan from the transfer of 19.5% equity in Changsha Zhongpan Real Estate Company. if the influence of this one-time investment income is excluded, the company's net profit is 70.25 million yuan in the first three quarters, compared with a loss of 98.37 million yuan in the same period last year. The substantial turnround in the company's performance after deducting non-recurring profits and losses this year is mainly due to the turnround in the performance of the main business of the supermarket and the contribution of the new profits of the three e-commerce companies newly incorporated into the scope of the merger.

E-commerce agent operation business has developed rapidly, and its operation and performance have exceeded expectations. The company's e-commerce agent operation team has excellent management ability, and after cooperating with Xinhua, the business has developed rapidly. so far this year, the customers who have signed cooperation agreements so far include China Resources Yibao, Green Arrow, Mars and Tsing Tao Beer. Among them, except Tsing Tao Beer to carry out cooperation in the distribution mode, the other brands start from the traditional agent operation mode. For large brands that have already cooperated with customized products, through the establishment of brand cooperation companies, it is most likely to reduce the possibility of being replaced by brands or other operating companies; at the same time, you can earn a gross profit in the production process of customized products by paying dividends at the end of the year. The operating level of the company far exceeds market expectations. In addition, we expect the full-year net profit of the company's e-commerce agency business to be close to 100 million, far exceeding the forecast of 65 million yuan.

The closure of loss-making stores and the integration of the supply chain led to a substantial improvement in the performance of the main business. In 2015, the company closed 14 loss-making stores with a total loss of 152 million yuan, shrugging off the heavy burden of operation and refocusing on the Fujian-Jiangxi market, shifting the format from former hypermarkets to shopping malls and community life supermarkets. In addition, the supermarket through supply chain integration, fresh to promote popularity, enhance the competitiveness of goods, the company's main business profitability has been greatly improved. Driven by the improvement of the main business and the net profit contributed by e-commerce on behalf of the operating business, the company's gross profit margin reached an all-time high of 21.94% in the third quarter, while the expense rate fell 1.32% year-on-year. We judge that the performance of the company's main business in 2016 will reach an inflection point.

Firmly optimistic about the operation of e-commerce agents, maintain profit forecasts and buy ratings. We are firmly optimistic about the extension of the company's e-commerce agent operation business, the original "generation operation service-Internet omni-channel sales-C2B customized products" to build a complete business closed loop, the core team brand marketing background, strong execution, performance and customer expansion faster than expected. In the main business of the supermarket, the main loss-making stores were closed last year, and the performance was improved through the integration of the supply chain to boost popularity. Maintain the profit forecast, the company's EPS is expected to be 0.53,0.37 and 0.44 yuan respectively from 2016 to 2018, corresponding to the latest stock price of 16-18PE is 21X/30X/26X, maintaining the buy rating.