Results for 2017 fell short of expectations. Revenue fell 9.9% year over year to RMB 1.35 billion, mainly due to a worse than expected decline in business in China. Overall gross margin declined 0.5 percentage points year over year to 56.2%. Net profit fell 7.5% year over year to RMB 805 million, mainly due to significant increases in advertising and sales expenses and net financial expenses. The company declared a final dividend of RMB 0.0142 per share and a special dividend of RMB 0.0284 per share. The annual dividend payout ratio reached 189.2%. The company will take some measures to strengthen channel management. These measures include adjusting stores and product portfolios, introducing the Amoeba model, repositioning the Kappa brand, and more. We expect these measures to improve the company's core sportswear business over the next few years. We lowered our 2018 and 2019 net profit forecasts by 10.5% and 10.2%, respectively, based on lower revenue and gross margin forecasts and higher operating expenses forecasts. The target price was lowered to HK$1.70 but the rating was raised to “buy”. Although 2017 results were worse than expected, we have a better outlook on the growth of the company's core sportswear business. We lowered our target price to HK$1.70 to reflect the adjusted earnings forecast. The new target price is equivalent to 11.1 times, 10.5 times, and 10.3 times the price-earnings ratio in 2018, 2019, and 2020, respectively, and also reflects an increase of 22.3%, so we raised our rating to “buy.” Risks: 1) The growth rate of China's sporting goods industry is slowing down; 2) fierce competition in the e-commerce business sector; 3) Unexpected gains or losses from investing in financial assets may have a serious impact on net profit.