Xujiahui 2016 mid-report announced that the performance continued to remain sound, basically in line with expectations. In the first half of 2016, Xujiahui achieved operating income of 1.026 billion yuan, down 0.72% from the same period last year, while net profit belonging to shareholders of listed companies was 121 million yuan, down 7.8% from the same period last year. Net profit after deducting non-recurrent profit and loss was 113 million yuan, down 4.9% from the same period last year. Basic earnings per share was 0.29 yuan, down 9.38% from the same period last year. The company's weighted average return on equity was 6.05%, down 0.95% from the same period last year. On the whole, the operating income and net profit are in a benign track, and the main business remains stable and expected.

The decrease in passenger flow and the increase in investment in new stores have led to a slight decline in revenue and net profit in the current period, and new stores are expected to lead revenue growth from negative to positive in the second half of the year. Xujiahui's operating income dropped slightly in the first half of the year, mainly due to a decrease in the flow of people in existing stores, such as Huijin Xuhuidian and Huijin South Station, which we believe is the result of overall macro-environmental factors, followed by the continuous impact of e-commerce, but the overall impact is small. In addition, on the expense side, the Huijin South Station store opened in the first half of the year, and the increase in mall fees and labor costs increased the company's three expenses. Data show that in the first half of the year, the company's sales expenses, management expenses and financial expenses were 18.50%, 9.10% and 92.48% respectively compared with the same period last year. We believe that in the second half of the year, the company's operating income is expected to benefit from the opening of Huijin South Store, and revenue is expected to increase significantly, which will broaden the company's business scope and drive the company's revenue growth from negative to positive.

The company continues to expand the department store business, intensive cultivation as the strategic direction, launched "Huijin" APP in the second half of 2016. 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 the second half of the year, Xujiahui "Huijin" APP will be launched to standardize and improve order processing, logistics and distribution processes and management systems, so as to achieve online and offline synchronization of supplier promotion and VIP members. Select suppliers to carry out the supply chain system docking, try the supplier system and E-EMC data docking. At the same time, the company develops Wechat marketing and other businesses to achieve online traffic to offline.

Xujiahui dividend yield continues to maintain a strong stability, the total dividend yield ranks first in the trade and retail sector, the market style prefers high dividend targets, and is expected to benefit first. Since its listing in 2011, the company has maintained an annual dividend yield of more than 2.5% and a dividend payout rate of more than 60%. After adding up the total dividend of each year, we calculate that the total dividend yield of the company (the total dividend since listing divided by the current market value) is 15.50%, which ranks first in the commercial and retail sector, and is the target of high-quality bonds in the commercial and retail sector. From an analytical point of view, we believe that the main reason is that the company's fundamentals are relatively stable and the cash flow is abundant. Under the condition that the traditional retail boom continues to decline, the company's net profit and cash flow are relatively stable, and the higher dividend payout rate over the years shows a better corporate governance environment to maximize the interests of shareholders. in the case of a high margin of corporate safety, it is worthy of long-term allocation of value investors. In the market continues to fluctuate, from the perspective of dividends, the company is an excellent risk aversion target.

Shanghai's national reform continues to heat up, and Xujiahui is expected to be the first to benefit. 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.

The target price is 17.52 yuan, maintaining the "buy" rating. We estimate that the net profit of the shareholders of the company belonging to the parent company from 2016 to 2018 is 2.60,2.67 and 277 million yuan respectively, and the diluted earnings per share are 0.63,0.64,0.67 yuan respectively, an increase of 2.84%, 2.70% and 3.63% respectively. Based on the closing price on July 28, 2016, the corresponding PE for 2016-2018 is 20.71,20.39,19.48 times. We value the company on the basis of revaluation and current market preferences, taking into account good operating conditions and stable high dividends, we continue to give 28.0XPE in 2016, corresponding to the target price of 17.52 yuan, to maintain the "buy" rating.

Risk tips: changes in consumers' shopping habits; the reform of state-owned enterprises is not as expected; the flow of people opening Huijin stores is not as expected.