Hendry's sales in 2015 were 13303 million yuan, down 9.9% from a year earlier. Shareholders' net profit fell 71.2% year-on-year to 145 million yuan, in line with the previous profit warning. The sharp decline was mainly due to impairment of goodwill and available-for-sale financial assets, declining sales and gains on asset sales in 2014. Excluding other income items, core net profit fell 47.1% compared with the same period last year. The company will not pay dividends in 2015.

The challenging business environment continues. During the period, the company closed 31 stores, bringing the number of stores in operation to 482. Chinese mainland integrated same-store sales fell by 9.5% in 2015, with the high-end part falling 11.2% and the middle part down 8.7%. During the economic downturn, the company continues to adjust its strategy, focusing on mid-range products. In addition, the company launched its own e-commerce platform "Shengshi Network" to attract passenger flow through multiple channels.

Investment rating "Collection", lowering the target price to HK $0.80. We forecast basic earnings per share of RMB 0.062, RMB 0.072 and RMB 0.082 for fiscal year 2016-2018, respectively. The company, the largest Swiss watch retailer in the country, is adjusting its strategy and cutting costs under difficult circumstances. Although the macro environment remains bleak in the short term, we are optimistic about the long-term prospects of companies with the rise of the middle class. The target price corresponds to 10.7 times 2016 p / e and 9.2 x 2017 p / e, respectively.