We recently visited Yifen to conduct research on the company's current situation and have communicated with company executives on recent fundamentals. The company adheres to the “Ten Thousand Lights” strategic direction for the next five years and aims to accelerate the revenue side in the short term. It is expected that the expansion of franchise stores and e-commerce businesses will put pressure on profit margins in the short term. Comment on the expansion of stores leading to faster revenue growth. According to our grassroots research, the total number of stores in Laiyifen currently exceeds 2,600, and the pace of opening stores has accelerated over the previous year. The company's goal of total number of stores for the whole year set at the beginning of '18 is not less than 3,300, and it is expected that the opening of stores may accelerate further in the second half of the year. The long-term goal for franchise stores is to account for at least 30% of the total number of stores. If the franchise business cooperation model is gradually straightened out, the share is expected to reach 10% in 2018. Currently, the company is gradually expanding mainly to the Yangtze River Delta, South China, and Southwest China. Gross margin may decline further due to the increase in the share of new channels. Since 2018, the company will continue to focus on exploring offline franchise stores and online e-commerce business models, but the gross margin level of the two is significantly lower than that of traditional direct-run stores. The 1Q18 gross margin was 41.7%, -4.2ppt year on year. In order to cope with the excessive decline in gross margin, the company gradually upgraded its product structure to raise the profit level of a single store, but it is expected that as the share of new channels in revenue increases, the gross margin level may decline further. Losses in the e-commerce business put pressure on net profit levels in the short term. According to our grassroots research, the company continues to vigorously expand its third-party e-commerce and self-operated app business, and is expected to maintain a rapid growth rate of 50% year-on-year throughout the year. However, intense competition for online snacks or continued losses in the telecom business put pressure on net profit. However, in the long run, as online business reflects its role in offline drainage, it may leverage the accelerated increase in revenue from offline stores and restore overall profit levels. At the same time, the franchise format's saving effect on sales expenses and management expenses will gradually be reflected over a long period of time. It is expected that the next 3 to 5 years will be an adjustment period for the company, and net interest rates may decline for a long time while the revenue side expands. The valuation proposal is due to the fact that the 2017 performance was much lower than expected, and the e-commerce business is expected to still lose money in the first half of the year. Accordingly, the net profit forecast for 2018 was lowered by 39.6% to 109 million yuan, corresponding to EPS of 0.32 yuan; the introduction of a 2019 revenue forecast of 5.113 billion yuan, and the net profit forecast of 122 million yuan, corresponding to EPS of 0.36 yuan. Since the company's profit margin has not returned to normal levels, we used the P/S valuation method. Based on the average P/S level of similar comparable companies, we gave the company 1.5 times P/S in 2018, corresponding to the target price of 18.78 yuan, 52% lower than the previous target price, maintaining a neutral rating. Risk area expansion risk, franchisee management risk, raw material price fluctuations, food safety risk.