The 3Q results slightly exceeded expectations, and Changyu A announced 3Q17 results: operating income of 1.03 billion yuan, up 2% year on year; net profit attributable to parent company was 146 million yuan, up 12.6% year on year, corresponding to earnings of 0.21 yuan per share. 3Q17 revenue was in line with expectations, and profit slightly exceeded expectations. Net operating cash flow in the third quarter reached 386 million yuan, a significant increase over the previous year, indicating that the company's sales have begun to stabilize. Development trend First, the company's revenue growth is still weak, but there is less risk of a sharp decline. The revenue of the leading brand Changyu Jiebaina was stable year over year. The overall revenue growth rate of middle and high-end brands is rapid. Low-end dry red series. Second, gross margin began to stabilize month-on-month. From 1 to 3Q17, gross margin reached 67%, and 3Q17 reached 68%. It can be seen that as the company focuses more on the brand and reduces the number of individual products, then future brand competitiveness is improving, and gross margin will remain stable. At the same time, the company's sales expense ratio continues to remain stable, and the risk of declining profitability is manageable. Finally, the company's continuous brand development is worth looking forward to. Further focus on cultivating high-quality brands is needed to increase high-end market share. According to the latest communication with the company, Changyu will continue to insist on cultivating Jiebaina in the mid-range price range. Profit forecasts We raised our earnings per share forecasts for 2017 and 2018 by 2% and 4% from RMB 1.4 and $1.46 to RMB 1.42 and $1.51, respectively. Valuation and recommendations Currently, the company's stock price corresponds to 26.5X P/E in 2018. We maintained a neutral rating, but raised our target price by 3.56% to RMB 37.80, which is 4.5% lower than the current stock price. Changyu B maintained a target price of 35.5 yuan. The target price corresponds to 20x P/E in '18, maintaining the recommendation. The risk is that if leading brands do not invest enough, then it is not ruled out that Baina's revenue will decline.