Xujiahui's third-quarter 2016 report released that its performance continued to maintain steady growth, in line with market expectations. In 2016 Q1-Q3, Xujiahui achieved operating income of 1.497 billion yuan, an increase of 2.00% over the same period last year, and the net profit attributed to the parent company was 172 million yuan, down 6.05% from the same period last year. Among them, the operating income of Q3 in 2016 was 471 million yuan, an increase of 8.49% over the same period last year, and the net profit belonging to the parent company was 51 million yuan, a decrease of 1.58% over the same period last year.

The revenue of the original stores such as Huijin Xujiahui store continued to decline, while the opening of the new store led to the company's revenue growth from negative to positive. The opening of the new store led to a substantial increase in the cost side, while the profit end did not grow as fast as the revenue end. In the third quarter of 2016, operating income increased by 8.49% compared with the same period last year, which is in line with our judgment on the revenue growth of the company. "in the second half of the year, the company's operating income is expected to benefit from the opening of Huijin South store and expand the company's operating area." the opening of the new store may lead to a change in revenue from negative to positive. At present, the average monthly turnover of the newly opened Huijin South store is about 10 million. It is expected to contribute 120-150 million yuan in operating income this year to make up for the decline in operating income caused by the reduction in passenger flow in the original stores. On the profit side, affected by the opening of new stores, the profit growth rate is far lower than the revenue growth rate due to the substantial increase in sales and management expenses. In 2016, Q1-Q3 's sales expenses and management expenses increased by 12.40% and 8.32% compared with the same period last year, which is much higher than the revenue growth rate. The net interest rate decreased by 1.1% compared with the same period, indicating that the opening of new stores affected profit growth in the short term.

The company continues to expand the department store business, intensive cultivation as the strategic direction, "Huijin" APP launch in line with expectations, looking forward to all-channel integration. During the reporting period, the company actively adjusted the offline brand structure, taking "steady adjustment" as the main direction, combing the brand and chain store image. Shanghai 600 focuses on improving ping ping efficiency and consolidating the team of suppliers, strengthening data speed measurement and market survey, reasonably planning adjustment plans, and stabilizing business performance; Huijin department store Xu Hui Store, starting with optimizing brand structure, actively introduces target brands, upgrade counter image, and increase catering supporting functions; Huijin Hongqiao Store takes the initiative to adjust category mix to achieve misplaced competition and maintain sustained growth in major categories such as ladies' wear. Huijin South Station store has stepped up environmental transformation, the overall image has been improved, brand adjustment and leasing investment continue to promote; Huilian Mall further enriches food categories and brands, and a series of adjustments straighten out brand governance and company management. improve brand operation efficiency. In terms of new store expansion, the company will continue to choose high-quality areas to carry out the "OUTLETS" and enter the field of fast consumer goods and fashion. In the second half of the year, Xujiahui "Huijin" APP has been launched, and the promotion speed is basically in line with expectations. In the future, the company will standardize and improve order processing, logistics and distribution processes and management systems, realize online and offline synchronization of supplier promotion and VIP members, select suppliers to carry out supply chain system docking, and try to data docking between supplier system and E-EMC. At the same time, the company develops Wechat marketing and other businesses to achieve online traffic to offline.

Xujiahui cash flow is stable, and the total dividend ratio ranks first in the trade and retail sector. The market style prefers high dividend targets and is expected to be the first to benefit.

Since the listing of Xujiahui, the proportion of total dividend divided by the current market value is about 15%, ranking first in the plate, and it is the target of high-quality bonds in the commercial and retail sector. the company's net profit and cash flow are relatively stable, and the high dividend payment rate over the years shows a better corporate governance environment to maximize the interests of shareholders. In the case of a high margin of safety, it is worth the long-term allocation of value investors. At present, new progress has been made in the reform of state-owned enterprises and is expected to enter the final battle. Shanghai, as the forefront of the reform of state-owned enterprises, the relevant targets of state-owned assets are expected to continue to receive market attention. Xujiahui, as the only listed company under Xuhui District SASAC, is expected to benefit first if Shanghai state-owned enterprises go first.

Target price 17.08 yuan, "overweight" rating. We estimate that the net profit of the shareholders of the company belonging to the parent company from 2016 to 2018 is 2.49,2.55 and 261 million yuan respectively, and the diluted earnings per share are 0.60,0.61,0.63 yuan respectively, an increase of-1.64%, 2.29% and 2.67% over the same period last year. Based on the closing price on October 25, 2016, the corresponding PE for 2016-2018 is 22.73,22.22,21.64 times. We value the company on the basis of revaluation and current market preferences, consider good operating conditions and stable high dividends, and continue to give the 2016 28.0XPE an "overweight" rating corresponding to the target price of 17.08 yuan.