Investment points 15H had a net loss of 3.62 million yuan, in line with expectations. 15H had operating income of 239 million yuan (-5.76%) and net profit of 3,619,900 yuan (-233.75%), in line with the performance forecast in the first quarter report. Since the company received about 30 million yuan in compensation for the demolition of the Xi'an Roast Duck Restaurant East Street Branch in the same period last year, the net profit of 15H Company declined sharply, and after deducting non-recurring profits and losses, the company's net loss was 10.1567 million yuan (+57.89%). The pressure on the main business is still significant, and the century-old store is seeking transformation. Due to the continued impact of the “three public funds limit” on the company, as well as the closure and rectification of some stores, the company's revenue declined to varying degrees in the first half of this year. In 2015, Company H achieved food service revenue of 188 million yuan (-12.2%) and food processing (manufacturing) revenue of 21,111,600 yuan (-6.1%). Since 2015, the restaurant industry has gradually recovered from a slump under the shadow of anti-corruption, and the 15H national catering revenue is 1499.64 billion yuan (+15.45%). While the industry is picking up, the company itself is also actively exploring new popular catering formats such as takeout, O2O convenience stores, and small outlets to expand sales channels and boost retail consumption. We expect the company's main business performance to remain basically the same throughout this year. Deep dive, cost control is good. 15H's gross profit margin was 38.82%, up 4.03 pcts from the same period last year (34.79%); sales expense ratio decreased (15H 30.75% vs 14H 31.81%); management expense ratio increased slightly (15H 7.18% vs 14H 6.10%); financial expenses fell 107% year on year due to increased interest income from raised capital. Under strict cost control, the company achieved a 58% increase in non-net profit despite falling revenue. After a major restructuring meeting, a new chapter of transformation will begin. The company's proposed non-public offering of shares to acquire 100% of Jiahe Yipin's shares was conditionally reviewed and approved by the Reorganization Committee of the Securities Regulatory Commission in July. The transaction is expected to significantly increase the company's profits and bring about immediate performance improvements. At the same time, Jiahe Yipin has a prominent market position in the Beijing region. Western Drink is the largest catering company in the northwest, and the two sides have direct collaborative space in cross-regional expansion and brand penetration; while Jiahe Yipin's pioneering layout in emerging food O2O fields such as online ordering and smart dining cabinets, bridging Western beverage product resources and store resources, further promotion of catering O2O is expected to open up room for profitable growth. At the same time, the company reached a preliminary cooperation agreement with Diocaffe in July of this year. The two sides will form complementary advantages in store expansion, production and sales, and logistics management. The company will also use this to enter the Western-style fast food field, and the mass catering layout will go to another city. After the fixed increase is approved, it is expected that the company's transformation will be further accelerated, and the comprehensive layout in the various fields of formal food, fast food, and casual dining through capital cooperation means such as mergers and acquisitions will continue. Risk warning. Business integration is slower than expected; short-term investment expansion during the transition period; food safety risks, etc. Profit forecasting, valuation and investment ratings. Affected by the downturn in the overall prosperity of the restaurant industry, the company's main business operations are lackluster. In the short term, profits can be obtained in the form of asset disposal and consolidation, government subsidies, etc. to reverse losses; at the same time, the company actively seeks new changes, and has expectations of continuing mergers and acquisitions in the future, which is expected to open up room for growth in performance and market value. Considering the full-year merger of Jiahe Yipin, maintaining the 2015-2017 fully diluted EPS forecast of 0.06/0.09/0.13 yuan, the current stock price corresponding to 2016 PE is 106X. Considering that the company has expectations of continuous transformation, mergers and acquisitions, and benefits from “Belt and Road” and other theme catalysts, it is expected that it will form some support for the company's stock price and maintain the “increase in holdings” rating.