Guide to this report: Healthcare brands are being upgraded to high-end and youthful, the channel structure continues to be optimized, and the share of e-commerce continues to increase. Set up an industrial fund to cultivate high-quality project resources in the field of beauty, and help increase internal and external extension simultaneously. Key investment points: Investment suggestions: Channel optimization and category expansion accelerate performance growth, and internal growth and extension are expected to grow at the same time. Maintain EPS of 1.19 yuan in 2018, increase EPS to 1.44 yuan (+0.06) in 2019 considering channel optimization and category expansion to improve profitability, and is expected to increase EPS of 1.72 yuan in 2020. Refer to comparable companies that gave 30X PE in 2018, lowered the target price to 36 yuan, and “increased holdings”. The high-end brand Medos originates from German technology, and its performance is growing strongly. The “Medos” brand is positioned in the middle and high-end markets, using “essential oil nourishment and repair” as a selling point, and has carried out technical cooperation with Germany's Dezhixin and BASF to increase advertising promotion. In 2013-2017, the sales revenue of the Medos brand increased from 12.92 million yuan to 178 million yuan, and the revenue share increased from 2% to 18%. The compound growth rate in the past three years was 49%, and the promotion of new products was very effective. The gross margin of Meitos reached 73.8% in 2016, which is 14 and 18 percentage points higher than that of Yujie and Lafon brands, which is expected to continue to drive performance growth. Strong e-commerce channels are expected to drive accelerated growth in performance. In recent years, the company has increased the construction of e-commerce channels. In 2017, e-commerce revenue increased 70%, accounting for 9%. The gross profit margin of e-commerce channels was 71.3% in 2016, 16 and 4 percentage points higher than supermarkets and distribution channels, and there is still plenty of room for improvement in e-commerce revenue. The company took a stake in Suqian Baibao and plans to acquire 26.8% of Honey Makeup Information's shares for 34.4 million yuan to expand its layout in the media and beauty fields. In the future, it is expected to cooperate in e-commerce content production, traffic introduction, fan economy, etc., to further strengthen the layout of emerging e-commerce channels. Category expansion is expected to cultivate new growth points. The company has set up an industry fund to actively seek and cultivate high-quality beauty project resources, especially excellent offline beauty channel providers. In the future, we plan to intervene in the fields of beauty and skincare products through independent research and development, overseas brand agents, and outsourced production. Risk warning: Competition in the industry intensifies, falling short of expectations due to lack of experience with new categories or channels, etc.