The investment proposal downgraded the rating to neutral, and the target price was lowered by 14% to HK$10.44 (corresponding to 8 times the predicted price-earnings ratio in 2018). The reason is as follows: Although the month-on-month decline in net profit in the first half of the year narrowed, performance still fell short of expectations. In the first half of 2017, La Chapelle's revenue increased 6.9% to 4.282 billion yuan, and net profit fell 1.1% to 282 million yuan, lower than our previous judgment that the growth rate was in single digits. The company re-adjusted its results for the first half of 2016 and the first half of 2017 in accordance with Chinese accounting standards, but the 2016 results were not adjusted. As a result, we are unable to conduct an in-depth analysis of the month-on-month changes in the company's 2017 interim financial results. If we only look at the growth rate of net profit, the decline in performance in the first half of this year narrowed somewhat. Business Overview: 1) Online sales increased 45%; 2) The number of offline POS outlets increased 6.9% year over year to 9,066. However, due to the sluggish overall consumption environment, the company's same-store growth rate was still negative, only -8.1%. Due to rising sales costs, the company's profitability declined. Gross margin increased 0.2 percentage points to 65.1%, mainly due to seasonal products accounting for a relatively high share of the company's sales. However, due to rising store rent and marketing costs, the sales expense ratio increased 1.4 percent. What is our biggest difference from the market? The company's growth is expected to continue to be sluggish in the second half of the year. Potential catalysts: Short-term lack of substantial catalysts. Profit Forecast and Valuation We have lowered our 2017 and 2018 earnings forecasts by 4.9%/11.5% respectively. We expect earnings per share to increase by 1.1%/+4.0% for this year and next two years, respectively, to 1.09 yuan and 1.13 yuan. The company's current stock price corresponds to the predicted price-earnings ratio of 7.7 times and 7.4 times in 2017 and 2018, respectively. The rating was downgraded to neutral, and the target price was lowered by 14% to HK$10.44 (corresponding to 8 times the predicted price-earnings ratio in 2018). There is room for an increase of 8.5%. The company's A-share listing process is still in preparation, and it will take time for the same-store growth rate to pick up. Although the medium-term dividend policy is not explained, we believe that the company's valuation level is still low due to the company's high dividend ratio from a historical point of view. The growth rate of risky same-store stores and the pace of network expansion are lower than expected.