The company's 2017 revenue decreased 7.96% year on year, net profit increased 7.49% year on year The company announced its 2017 annual report: 2017 achieved operating income of 3.770 billion yuan, a year-on-year decrease of 7.96%; realized net profit of 109 million yuan, equivalent to a comprehensive dilution of EPS of 0.26 yuan, an increase of 7.49% over the previous year; realized net profit of 92.49 million yuan, up 25.75% year on year. The performance is in line with the performance report released by the company on January 24. Looking at the quarterly split, the company achieved operating income of 906 million yuan in 4Q2017, a year-on-year decrease of 2.34%, a decrease of less than 6.78% in 3Q2017; realized net profit of 13.76 million yuan, a year-on-year decrease of 43.74%; while in 3Q2017, the company's net profit to the mother increased 9.52% year-on-year. The consolidated gross margin increased by 2.32 percentage points, and the period expense ratio increased by 1.47 percentage points. The company's consolidated gross margin in 2017 was 23.66%, up 2.32 percentage points from the same period last year. The company's expenses for the period in 2017 were 19.70%, up 1.47 percentage points from the same period last year. Among them, the sales/management/finance expense ratio was 17.49%/2.78%/-0.57%, respectively, a change of 1.23/ 0.23/ 0.01 percentage points from the same period of the previous year. Promote the transformation of new retail stores and release the second draft employee shareholding plan. Under the guidance of Ali's new retail concept, the company has begun to build innovative stores and adjust old stores. The proportion of fresh products in traditional stores is expected to increase, the offline shopping environment is expected to improve drastically, and the number of online orders is also expected to increase. At the same time, the company announced the second draft employee stock ownership plan, which plans to raise no more than 6 million yuan of capital from no more than 110 employees. The source of shares in the shareholding plan is purchased through the secondary market, and the plan is locked up for 36 months. Maintaining the profit forecast and maintaining a “neutral” rating, the company's performance is in line with previous reports. We maintain our forecast for the company's fully diluted EPS for 2018-2019 of 0.28/ 0.31 yuan, respectively, and added a forecast of 0.35 yuan for EPS in 2020. The company's valuation is still high. The risk of maintaining a “neutral” rating suggests that the new business format of cooperation with Ali did not meet expectations, and the CPI growth rate fell short of expectations and suppressed supermarket performance.