The company's recent situation Lianhua announced a series of reform measures: 1) Management restructuring: The former chairman and 3 other executive directors withdrew from the board of directors, and Mr. Ye, chairman of Bailian, became the chairman of Lianhua. In addition, two of Yonghui's executives will join the company's board of directors as non-executive directors. 2) Procurement integration: Lianhua and Yonghui signed a procurement framework agreement to purchase a variety of products (mainly fresh products and food) by December 31, 2015. The comments on management restructuring show the firm determination to reform state-owned enterprises. The severe supermarket industry environment and the company's poor performance in the past show that Lianhua's traditional management and operation model can no longer sustain future development. The Shanghai government is aware of the need to carry out systematic reforms in Lianhua. After the management restructuring, we expect strategic investors to have a greater influence on Lianhua. Procurement scale advantage. The total sales of Lianhua and Yonghui exceeded 70 billion yuan. The purchase agreement will improve Lianhua's future gross profit margin while improving the quality of the company's fresh products and food operations. The valuation recommendation is to maintain the confidence buy rating and lower the target price by 9% to HK$6.6 (corresponding to 0.2 times the 2016 market sales rate), based on a more careful valuation level. Risk reforms fell short of expectations; e-commerce development.