Xinhuadu released its 2016 three-quarter report. Xinhuadu achieved a total operating income of 5 billion yuan in the first three quarters of 2016, an increase of 1.69% over the previous year, and net profit attributable to shareholders of listed companies was 212 million yuan, an increase of 315.4% over the previous year. Net profit after deduction was 11.54 million yuan, an increase of 109.09% over the previous year. Among them, Q3 achieved a total operating income of 1,608 million yuan, an increase of 1.44% over the previous year; net profit attributable to shareholders of listed companies was 163 million yuan, an increase of 318.83% over the previous year. The sale of Changsha Zhongfan Real Estate led to a sharp increase in Q3 profit of 318.83% year on year. The company's third-quarter profit increased sharply by 318.83% year on year, mainly due to the company's sale of 19.5% of the shares of Changsha Zhongfan Company to obtain investment income of 208 million yuan. Excluding the impact of non-recurring profits and losses such as the sale of Zhongfan Real Estate, the company's net profit for the third quarter was -10.9 million yuan, compared to -67.16 million in the same period last year. The loss margin narrowed sharply. Faced with the continued economic downturn and the impact of e-commerce shocks, all of the company's lossless stores have basically closed. At the same time, the company launched a new brand “Neighborhood”, which features fresh and ready-to-eat products, creates a community platform integrating leisure, shopping, light meals, and services, and further cultivates the local market. The company's performance improved significantly year over year. The performance of e-commerce agency operations is good, and the development prospects are broad. Although the company did not disclose agency operating data for the third quarter, judging from the first half of the year's data, the company's 2016 H1 generation operations achieved total revenue of 110 million yuan and net profit of 24 million yuan; year-on-year increases of 19% and 31% respectively, and the performance performance was good. Currently, the company's agency business mainly focuses on FMCG categories such as liquor. The scope of business includes agency operation services and Internet sales (including customized and non-customized products). The share of online liquor sales channels is extremely low, and the market prospects are broad. As a leader in the proxy operation industry, the company will share the dividends of rapidly increasing the scale of online alcohol shopping. With the foundation of cooperation between Xinhuadu and many brands over the years and the support of strong majority shareholders, as the number of successful cases of the company's proxy operations continues to increase, there is plenty of room for imagination to replicate the agency business across categories. Maintaining the company's “increase in holdings” rating and being optimistic about the development prospects of the company's proxy business, we have lowered the company's profit forecast. In 2016-2018, the company's net profit forecast is estimated to be 235/1.41/189 million yuan respectively (previously 3.2/232/326 million yuan). We are optimistic about the long-term development prospects and performance recovery of the company's e-commerce agency operation business, and maintain the company's “increased holdings” rating. Recently, the company's stock price has been rising and stopping for two consecutive days. Investors are advised to act prudently. Risk warning: severe macroeconomic downturn; food (alcohol) safety incidents; risks that may result from incomplete disclosure of information in the company's history; one-time losses caused by large-scale store closures.