This report is read as follows:

The performance of H1 in 2016 was in line with expectations; the food and beverage business picked up, the gross profit of the manufacturing business increased, the revenue decreased, the profit on the disposal of assets benefiting from net profit increased significantly, and brand word-of-mouth and product quality ensured future performance.

Main points of investment:

Performance is in line with expectations and holdings are increased. ① H1 catering business picked up in 2016, and net profit benefited from the disposal of assets increased significantly. ② improved the quality of dishes, stepped up publicity, continued to explore new e-commerce models, and broadened sales channels. Taking into account the non-recurrent gains from asset disposal, ③ raised its EPS in 2016-2017 to 0.05max 0.06 yuan (+ 0.04max 0.04 yuan), maintained the previous valuation assumption of 7.5xPS, and raised its target price to 11.49 yuan.

Performance summary: the company's 2016 H1 revenue is 251 million yuan / + 5.07%, the parent profit is 20.88 million yuan / + 676.76%, and the non-net profit is-1128 yuan /-11.02% EPS0.04 yuan.

The main catering industry has warmed up, and online sales have increased significantly. ① stepped up food innovation and store promotion, expanded online sales, stabilized and rebounded revenue from the main catering business (199 million yuan / + 5.66%); opened 45 new small chain stores to expand brand influence; ② improved product quality, changed marketing strategy, and consolidated seasonal products (revenue increased by 24.94% year-on-year) The revenue of the food production industry is 1714 yuan /-18.8%, and the gross profit margin is 18.63%. The gross profit margin is 3.03%. However, the rise in the cost side leads to a decline in the comprehensive gross profit margin of 0.93pct to 37.89%. The profit and loss on the disposal of ③ current assets increases the net profit by 42.46 million yuan. The period expense rate is 38.84%/+1.01pct, in which the sales expense rate is 31.53%/+0.78pct, and the interest rate factor leads to the financial expense rate 0.91%/+1.04pct.

Increase the publicity of time-honored brands and focus on marketing integration. Eleven characteristic brands of ① have been awarded "Chinese time-honored Brands", and their brand influence has been continuously improved. ② has achieved initial results by expanding marketing channels and models, building an online sales platform and focusing on self-media publicity. ③ integrates industry resources, carries out diversification, and goes deep into the training, tourism and education industries.

Risk hints: the impact of seasonal products on the company's performance is uncertain; competition in the catering market intensifies.