Key investment performance review: 2017 revenue increased by 22.9%, net profit increased 28.6%; 17Q4 revenue increased 17.9%, profit increased 24.0%. The company achieved annual revenue of 1,289 million yuan, an increase of 22.9%, net profit of 182 million yuan, an increase of 28.6%, and net profit of 166 million yuan after deducting non-net profit of 166 million yuan, an increase of 21.5% over the previous year. 17Q4 revenue was 530 million yuan, up 17.9%; net profit was 83.53 million yuan, up 24.0%; gross margin and net profit margin were 43.6% and 14.1%, respectively, up 0.4 pct and 0.6 pct, respectively. Revenue analysis: The increase in the price of medium and high-end rice wine also drove a 5.6% increase in revenue, while Wupenmao Liquor also promoted a 70.9% increase in revenue from ordinary rice wine. By product, the revenue of medium and high-end rice wine was 749 million yuan, an increase of 5.6%, and sales volume decreased by 8.2%, but benefiting from price increases and structural improvements, the tonnage price of medium and high-end rice wine increased 15.0%; the revenue of ordinary rice wine was 496 million yuan, an increase of 70.9%, mainly due to the acquisition of Wupenmao Liquor in September 2016, which led to a consolidation of the full year of 2017. The sales volume of ordinary rice wine increased by 54.2%, and the tonnage price increased by 10.8%; other wines achieved revenue of 31.09 million yuan, a decrease of 20.6%. Looking at the subregion, revenue from Zhejiang was 881 million yuan, an increase of 15.9%, and revenue from intensive farming within the province increased steadily; the revenue of Shanghai and Jiangsu was 175 million yuan and 121 million yuan respectively, up 106% and 46% respectively, mainly from the Wupenmao wine industry; revenue from other regions in China and overseas was 85.18 million yuan and 14.17 million yuan respectively, down 16.1% and 52.7% respectively. Profit analysis: The effects of price increases and product structure optimization are evident, and gross margin has increased slightly. The company raised prices twice in 2016. In December, the prices of pure five-year series and aged wine series products increased by 6% and 11%. In 2017, the tonnage prices of high-end rice wine and ordinary rice wine increased by 15.0% and 10.8% respectively. The effects of price increases and product structure upgrades were remarkable. The gross margin of the middle and high-end rice wine and ordinary rice wine businesses increased by 2.0pcts and 4.4pcts respectively. The overall gross margin of alcoholic beverages was 43.66%, a slight increase of 0.47pct. In terms of sales expenses, the company increased marketing efforts to expand brand influence. The share of advertising expenses and promotional expenses in revenue increased by 0.3 pct and 0.4 pct, respectively, and the overall sales expenses ratio increased by 0.5 pct to 11.7%. The management expense ratio was basically the same; benefiting from lower interest expenses, the financial expense ratio decreased by 1.1%. The company's overall net interest rate was 14.1%, an increase of 0.6pct. Future outlook: The synergy of mergers and acquisitions is gradually showing, and the merger and acquisition of Xianheng Foods enters the preserved milk and cooking wine business. Since there is a clear differentiation between rice wine consumer groups and taste and other types of alcoholic beverages, demand for middle and high-end rice wine is expected to rise steadily in the future, with price increases effectively covering cost pressure and enhancing the company's profitability. At present, the company has a design capacity of 155,000 tons and an actual production capacity of 151,200 tons. The main body of the 100,000 ton technological transformation project has been completed, and production is expected to be completed by the end of 2018. Wupenmao Liquor achieved net profit of 36.26 million yuan in 2017, and mergers and acquisitions helped the company expand the Jiangsu and Shanghai markets; Tang Song Liquor achieved net profit of 8.86 million yuan, expanding its advantages within the province. The company previously announced that it plans to acquire 100% of Xianheng Food's shares for 735 million yuan. Xianheng Foods mainly sells fermented milk, condiments, etc., with revenue of 145 million yuan in 2017, an increase of 12.0%, net profit of 48.47 million yuan, an increase of 67.7%. The persimmon and condiments business has performed well, and is expected to bring new performance growth points after the completion of future mergers and acquisitions. Risk warning: The prosperity of the rice wine industry has declined, and the integration of new products has fallen short of expectations. Earnings forecasts, valuations and investment ratings. Maintaining the 2018-19 forecast and adding the 2020 forecast, we expect the company's 2018-2020 EPS to be 0.45/0.52/0.64 yuan, respectively, an increase of 21.7%/17.7%/22.2%, corresponding to PE 24/20/17 times, maintaining the “increase in holdings” rating.