Event: The company released its 2017 annual report. The company achieved operating income of 1,289 million yuan, an increase of 22.91% over the previous year; net profit of 182 million yuan, an increase of 28.62% over the previous year; and EPS of 0.37 yuan/share, an increase of 12.12% over the previous year. Among them, in the fourth quarter alone, the company achieved operating income of 530 million yuan, an increase of 17.87% over the previous year, and net profit of 84 million yuan, an increase of 23.96% over the previous year. The results of the acquisition were revealed, and the consolidated results led to relatively rapid growth in the company's performance. In 2017, the company achieved revenue of 1,289 million dollars, an increase of 22.91% over the previous year, mainly due to the increase in the scope of the consolidated statement for the current period compared to the previous year. In September 2016, the company successfully completed the transfer of non-public shares to raise capital to raise capital; so far, the company directly holds 100% of the shares in Wupelmao Liquor Co., Ltd. and Zhejiang Tangsong Shaoxing Liquor Co., Ltd. In 2017, Wupenmao and Tangsong Liquor achieved net profit of RMB 36.26 million and RMB 8.86 million respectively, up 21% and 170% year-on-year. By product, ordinary liquor grew rapidly. The company's high-end rice wine, ordinary rice wine and other liquors achieved revenue of 749 million, 496 million and 31 million respectively, up 5.58%, 70.86%, and -20.60% year-on-year. By region, the growth rate outside the province is relatively rapid. The company achieved revenue of 881 million, 381 million, and 14 million yuan respectively within the province, outside the province, and abroad, respectively, with year-on-year increases of 15.89%, 41.45%, and 52.67%. The price increase led to a slight increase in gross margin, and the cost ratio remained stable in 2017. Although the company's share of ordinary rice wine increased to 38.5% from 27.7% in 2016, the company's overall gross margin increased slightly by 0.4 pcts to 43.6% year on year. The main reason is the company's price increase. In January 2017, the company raised the price of the pure 5-year series by 6% and the price of aged wine by 11%. In addition, it is also related to improvements in the internal product structure of ordinary rice wine. In 2017, the gross margin of the company's ordinary rice wine increased by 4.4 pcts over the same period last year. In terms of costs, since the company's sales are mainly concentrated in the Jiangsu, Zhejiang, and Shanghai regions, it is relatively stable, so overall expenses have remained stable. In 2017, the company's sales expense ratio increased slightly by 0.5 pcts year on year, management expense ratio increased 0.3 pcts year on year, and financial expense ratio decreased by 1.1 pcts year on year. The overall cost rate is not expected to fluctuate much in 2018. The acquisition of Xianheng entered the condiment market at the end of 2017. At the end of 2017, the company acquired Shaoxing Xianheng Food Co., Ltd. Rice wine and tofu milk are characteristic products of Shaoxing, and both involve fermentation processes, so they have some common features. Xianheng is a leading local tofu milk company. The acquisition of Xianheng will help increase the company's overall revenue scale and contribute to the company's profit growth. Profit Forecast and Rating In the second half of 2016, the company acquired Wupelmo Liquor Co., Ltd. and Zhejiang Tangsong Shaoxing Liquor Co., Ltd. and Zhejiang Tangsong Shaoxing Liquor Co., Ltd.; in December of the same year, it also bid to obtain 14.78% of the shares in Tapai Shaoxing Liquor. Through a series of acquisitions, the scale of the company has grown rapidly, and at present, the synergy effect is also quite good. We forecast that the company's 2018-2020 EPS will be 0.43/0.50/0.59, corresponding PE will be 24.9/21.4/18.1, and the target price will be 14.5 yuan, maintaining the “increased holdings” rating. Risk warning: Post-acquisition synergies fell short of expectations, and market expansion fell short of expectations.