Net profit for the first three quarters fell 48%, and revenue growth in the third quarter rebounded, with profit losses. In the first three quarters, the company achieved positive double-digit growth, a sharp increase in exports, and a decline in group purchases; operating profit of 53.53 million, down 41.19% year on year, and net profit attributable to shareholders of listed companies was 5.09 million yuan, down 47.52% year on year, in line with expectations in the company's interim report (down 20-50%), with earnings per share of 0.16 yuan. The decline in net profit was due to a decline in gross margin and an increase in sales and financial expense ratios. In the third quarter, the company achieved revenue of 279 million yuan, a year-on-year increase of 21.7%, and the growth rate clearly rebounded from 14.42% and 9.99% in the first and second quarters; however, there was a net loss for the first time in a single quarter. Operating profit and net profit attributable to shareholders of listed companies were -1.03 million yuan and -318 million yuan respectively (vs. net profit attributable to shareholders of listed companies in the second quarter decreased 6% year-on-year to 32 million yuan), resulting in a decline in gross margin, rising financial expenses, and tax rate changes (due to uncertainty in the high-tech enterprise qualification review, corporate income tax withheld 25% on the company's net profit in the 3rd quarter) The impact was 2,044,800 yuan). The gross margin fell in the first three quarters and the sales expenses ratio rose, but the increase in Q3 revenue clearly showed that the expense ratio fell 2.58 points to 38.64% in the first three quarters compared to the same period last year, mainly due to an increase in the share of export revenue with low margin. Among them, the gross margin for the third quarter fell 2.74 points to 32.63% year on year, the lowest point in recent years. The sales expense ratio increased 1.06 percentage points to 23.23% year on year, due to an increase in the company's marketing terminal store leasing, depreciation, sales staff wages, and advertising expenses; the management expense ratio decreased by 0.55 percentage points to 4.91%; and the financial expenses rate increased by 2.22 percentage points to 2.4%, mainly due to an increase in interest expenses on corporate bonds. Among them, the sales/management/finance expense ratio for the third quarter decreased by 2.55, 1.03, and increased by 1.59 percentage points to 23.25%, 4.8%, and 2.55%, respectively. The decline in the cost ratio mainly benefited from rapid revenue growth. Accounts receivable increased 110% from the beginning of the year to 454 million yuan, due to the relaxation of credit terms for franchise stores during the peak sales season; inventories fell 12.4% from the beginning of the year to 339 million yuan. Net operating cash flow was -7.38 million, mainly due to the extension of the sales repayment cycle. The balance of deferred income tax assets increased 95.26% from the beginning of the year, mainly due to uncertainty about the company's high-tech enterprise qualification review, and corporate income tax is expected to be prepaid at a 25% tax rate in 2013. After a difficult “winter”, performance continued to be under pressure. Profit forecasts were lowered. In the first half of the year, the company opened 164 directly-managed stores (16 more) and 511 franchise stores (6 more), and not many new stores were added in the 3rd quarter. Implementing a regional marketing model, terminal stores are divided into four categories, and management is more refined. Since 12 years, the company has increased its OEM export ratio, which has had a negative impact on overall gross margin. At the same time, the contribution of new outlets is still in the cultivation period, and the cost during the extended expansion period is difficult to control, increasing the pressure on net profit growth. Although the single-quarter gross margin rebounded in the second quarter, reducing the pressure on performance, and the downward trend in single-quarter performance slowed down, gross margin continued to decline in the third quarter, and the pressure on performance increased. Comprehensive considerations: 1) Order amounts for spring and summer 13 increased by single digits, while orders for fall and winter 13 remained flat and declined slightly. 2) The company's high-tech enterprise qualification expires in '12. Although the application has now been submitted, the probability of approval in '13 is unlikely. The company expects net profit to drop by 20-50% throughout the year. For the time being, neutral (maintenance) performance for the next three years is estimated at a 25% tax rate. 3) On October 26, the company announced that the state-owned construction land use rights (area of about 265,208 square meters, assessed land price of 71.6 million) of undeveloped industrial land were collected by the Zhucheng Land Reserve Center. The remaining portion of the current land acquisition compensation price after deducting the net book value of land use rights will be included in the company's current profit and loss, and the impact on net profit is expected to be 7.03 million yuan. We lowered the EPS after dilution in 13-15 years to 0.24 yuan, 0.28, and 0.32 yuan respectively (previously: 0.33 yuan, 0.37, and 0.44 yuan).