Core opinion: The decline in revenue in the first half of the year, gross profit margin, and improvement in the cost ratio made the company turn a loss into a profit of Renren and achieved operating income of 6.534 billion in the first half of 2013, a year-on-year decrease of 0.84%, and the decline narrowed in the second quarter. The gross profit margin for the first half of the year was 20.79%, up 0.98 percentage points from the previous year; the sales expenses ratio was 19.27%, down 0.46 percentage points from the previous year. Under the company's policy of slowing down expansion and paying close attention to profitability and cost control, the company partially absorbed the cost pressure brought about by the rapid opening of stores in 2010 and 2011. At the same time, gross margin increased. After deducting losses of 22.97 million in the first half of the year, after deducting losses of 22.97 million from store closures, it turned a profit of 10 million, turning a loss into a profit, yet its profitability still lags far behind the industry average. The company opened 5 new stores in the first half of the year, adding 88,500 square meters, which is the same as the same period last year, and the scale of expansion has stabilized. Operating outlook for the second half of the year, the company's expense ratio has passed its highest point, and the cost pressure to open a large store against the backdrop of a slowdown in consumption in 2011 has basically been exhausted. It is expected that in the second half of the year, the company will still incur certain expenses when adjusting the business structure and category structure in South China. Since the entire hypermarket business in recent years has been affected by the slowdown in consumption growth, increased competition in stores, rising labor rent costs, and e-commerce diversion, and there is limited room for performance growth, we judge that the company will enter a stage of steady and slow performance growth. Profit forecasts and investment recommendations We judge that due to the slowdown in consumption growth, increased competition in stores, rising operating costs, and e-commerce diversion, there is limited room for future performance growth in the hypermarket business format. We expect the company to have entered a phase of poor questions and slow performance growth. We lowered the 2013-2015 EPS to 0.13 yuan, 0.14 yuan, and 0.16 yuan, giving the estimated revenue for 2013 0.27 XPS, corresponding to the 12-month target price of 9.6 yuan, maintaining the holding rating. Risks suggest that progress in regional and business format adjustments is being blocked, and consumption growth continues to slow.