Key investment points: The company is a leader in high-end women's shoes. Performance recovery is obvious, and the upward trend is good. 1) The company's 17-year performance was a clear inflection point, spearheading the recovery of the same industry. In 2017, revenue increased 12% to 1.73 billion yuan, and net profit to mother increased 60.3% to 190 million yuan. Even after deducting the influence of Xiaozi Technology, the company's 17-year revenue/net profit to mother grew at a rate of 10.4%/53.5%, leading the industry. 2) The recovery trend is good, and performance continues to pick up. In 18Q1, the company's revenue increased 27.6% year on year to 470 million yuan, and net profit to mother increased 125.6% year over year to 80 million yuan. Excluding the influence of Kid Technology, revenue from main businesses such as footwear reached 410 million yuan, an increase of 11.4% year on year; achieved net profit of about 50 million yuan, an increase of more than 50% year on year, and the recovery momentum is good. “Endogenous+Outreach” expands the company's brand matrix and gradually builds a multi-brand fashion group. 1) Deepen the field of women's shoes vertically, and the differentiated positioning of multiple brands covers market segments. It has six major women's shoe brands, including five private brands KISSCAT, ZSAZSAZSU, tigrisso, KISSKITTY, and KASMASE, as well as the agency for high-end Spanish brand Patricia. Among them, KISSCAT grew steadily, accounting for half of its revenue, and ZSAZSAZSU and tigrisso benefited from consumption upgrades and grew rapidly. 2) Actively expand fashion lifestyle brands and categories horizontally. Launched a “catalogue” of all categories of menswear brands, represented the Italian fashion creative brand “O bag”, and participated in the international designer brand United Nude to improve the company's category layout. Omni-channel efficiency has improved significantly, and the brand has recovered across the board. 1) The adjustment of offline channels has been very effective, and the same store has improved significantly. The company continued to optimize channels and gradually eliminate stores that were underdeveloped. In '17, there was a net decrease of 32 terminal outlets to 1927, while offline revenue increased 5.5% year-on-year to 1.47 billion yuan, and store efficiency improved markedly. 2) Rapid online growth, continuous optimization of the inventory structure, and significant increase in gross margin. Online revenue increased 56% to 240 million yuan in 2017, and the share of revenue increased by 4 pct to 14%. At the same time, due to the optimization of the inventory structure, the share of new products continued to increase, leading to a sharp increase of 7.7 pct to 56.8% in 2017. Multiple factors helped the company continue its recovery trend. 1) Acquire tech kids, build an accurate marketing system, and help e-commerce business take off. The company acquired 100% of Tech Kid's shares in December 2017 at a price of 888 million yuan. This move helped the company build an accurate marketing system, cultivate its existing customers, increase the repurchase ratio; and inject the digital Internet gene to promote e-commerce business upgrading. 2) Excellent self-production capacity and flexible supply chain upgrade. In 2017, the self-production ratio reached 59%; at the same time, four production lines were upgraded to fully realize small-batch, multi-batch, and multi-variety flexible production models to improve efficiency and quality. 3) Digital R&D enhances efficiency and accuracy, and strengthens the competitive advantage of independent R&D. In 2017, an omni-channel central product lifecycle management PLM system was launched to achieve rapid product development and R&D platformization, technology standardization, and process digitization, and improved R&D efficiency and accuracy. As a leading leader in high-end women's shoes in China, the company is endogenously extending to build a multi-brand fashion group. The net profit growth rate is expected to reach more than 50% in 2018, corresponding to PE only 13 times. The performance growth rate is high, the valuation is low, and the margin of safety is obvious. For the first time, coverage is given a “gain” rating. The company's performance is steady, spearheading the recovery of the same industry, continuing to grow rapidly online, and optimizing offline channels to improve store efficiency; the acquisition of Kid Technology introduced Internet genes to build a precise marketing system, and synergy effects can be expected. We expect the company to achieve net profit of 2.9/3.4/380 million yuan in 2018-2020, corresponding EPS of 0.67/0.78/0.89 yuan respectively, and corresponding PE of 13/11/10 times, respectively, giving it an “increase in wealth” rating. The investment case investment rating and valuation company, as a leading domestic leader in middle and high-end women's shoes, is endogenously extending to build a multi-brand fashion group. The net profit growth rate is expected to reach more than 50% in 2018, corresponding to PE only 13 times. The performance growth rate is high, the valuation is low, and the margin of safety is obvious. For the first time, it has covered a “gain” rating. The company's performance is steady, spearheading the recovery of the same industry, continuing to grow rapidly online, and optimizing offline channels to improve store efficiency; the acquisition of Kid Technology introduced Internet genes to build a precise marketing system, and synergy effects can be expected. The company is expected to achieve net profit attributable to mother in 2018-2020 of 2.9/3.4/380 million yuan, corresponding EPS of 0.67/0.78/0.89 yuan, respectively, and corresponding PE of 13/11/10 times, respectively, giving it an “increase in wealth” rating. Key assumptions 1) Footwear brand: KISSCAT brand adjusted and recovered, revenue growth rate was 4.7%/7.3%/6.4% in 18-20; ZSAZSAZSU brand revenue continued to grow rapidly, with a growth rate of 24.3%/18.7%/14.3%; tigrisso brand maintained steady growth, revenue growth rate was 12.8%/14.8%/12.5%; KISSKitty brand accelerated development, revenue growth rate was 7.4%/13.5%/14.8%; 2) Kid Tech: mobile app distribution Revenue growth rate from promotion business was 22.7%/19.5%/15.4%; revenue growth rate from programmatic promotion business was 30.7%/30.0%/16.0%. Unlike the public perception, the market may think that the company's main business with women's shoes has obvious bottlenecks, making it difficult to continue to develop. However, the company is deeply involved in the field of women's shoes. The differentiated positioning of multiple brands covers market segments. At the same time, it is actively expanding fashion lifestyle brands and categories horizontally to build a multi-brand fashion group. The future space can be expected. At the same time, judging from the terminal retail situation, benefiting from the upgrading of consumption, middle and high-end women's shoes have clearly recovered, the company continues to optimize channels, and the same store has improved markedly. As mass consumption recovers and brand concentration continues to increase, the company, as a leading women's shoe leader, will directly benefit in the future. Also, the market may think that Xiaozi Technology is an internet company, which is very different from the company's main business and cannot develop collaboratively. However, in reality, Kid Technology is in a stage of rapid development, and its performance is growing rapidly, complementing the company's profit growth. At the same time, the acquisition of Kid Technology is an e-commerce outlet layout, and it also has a great effect on the development of the company's e-commerce business. In addition, the company can use Xiaozi Technology's Internet big data capabilities to build an accurate marketing system, cultivate existing customers, increase customer repurchase rates, and strengthen customer stickiness. The catalyst for stock price performance was a net increase in the number of stores; the same store growth rate exceeded expectations; and the growth of emerging brands such as ZSAZSAZSU, tigrisso, and KissKitty exceeded expectations. The core assumption is that mass consumption will decline and retail terminals will continue to be sluggish; emerging brands will not be recognized by the market and will continue to lose money.