Main points of investment:

The company's 2015 results were in line with expectations: operating income was 499 million yuan, down 8.57% from the same period last year; the net loss belonging to listed companies was 31.6476 million yuan, down 386.13% from the same period last year, mainly due to higher profit and loss income from the disposal of non-current assets in the same period last year; after deducting non-current assets, the 14-year loss continued to expand to 39.2092 million yuan, down 44.54% from the same period last year.

The main business continues to be under pressure: the rise of mass catering drives the slow recovery of the industry, the company is actively transforming, promoting takeout, small specialty stores, popular consumption varieties of the people, expanding sales channels, income and gross profit margin are affected to a certain extent. In 2015, the company's catering revenue was 343 million yuan, down 12.24% from the same period last year, room revenue was 15.6711 million yuan, down 16.61% from the same period last year, commodity revenue was 30.1504 million yuan, down 11.53% from the same period last year, rental income was 46.5148 million yuan, up 14.85% from the same period last year, and other income was 6350.59 yuan, up 3.46% from the same period last year. According to comparable standards, the company's comprehensive gross profit margin slightly decreased 0.96pp compared with the same period last year, including the gross profit margin of catering services decreased by 1.96% to 30.90%, the gross profit margin of goods increased by 1.04pp to 43.76%, the gross profit margin of guest rooms increased by 2.16pp to 66.64%, and the gross profit margin of other businesses increased by 3.24pp to 35.62%. During the period, the total expense rate increased by 4.15pp to 41.2%: the increase in sales expense rate by 3.05pp to 32.12% was mainly due to the increase in rental fees; the increase in management expense rate by 12.41pp to 8.73 was mainly due to the increase in intermediary fees; and the introduction of raised funds reduced the financial expenses by 1.31pp to 0.35% compared with the same period last year.

Looking forward to the acceleration of transformation and upgrading: in the face of the new normal of the catering industry, the company adheres to the transformation and upgrading development strategy. 1) Xi'an Restaurant East Street main Store project is slightly behind schedule due to demolition, road red line adjustment and other factors. In the future, the company will speed up the relevant work and make a smooth transition; actively promote Dongda Rongdi hot spring recuperation project feasibility demonstration and other preliminary work. 2) introduce "Internet +" to realize the new business model of catering O2O, and explore the business and family breakfast distribution business. 3) make full use of the capital platform of listed companies, integrate high-quality resources, actively explore and promote the reform of mixed ownership, realize the diversification of investors, market-oriented management mechanism, and stimulate the vitality of the company. Take various forms to promote capital operation, improve the level of corporate asset securitization, and promote the development of enterprises.

Investment advice: the catering industry has entered a new normal, the company's main business continues to be under pressure, relying on the disposal of assets and other ways to reverse losses. It is expected that the future transformation will accelerate, on the one hand, to achieve the "popular" adjustment of the original business, on the other hand, to seek extension expansion and integration of market resources. The company is located in the strategic area of "Belt and Road Initiative" and belongs to the target of state-owned enterprise reform. It is estimated that in 16-17-18, the annual EPS will be 0.00Compact 0.02max 0.03 yuan per share, and the current market capitalization of the company is 3.294 billion yuan, giving an overweight rating.

Risk tips: food safety issues; the overall recession of the catering industry; the transformation is slower than expected.