Matters On July 24, Sanjiang Shopping released its 2018 semi-annual performance forecast. The company expects to achieve operating income of 2,077 billion yuan during the reporting period, an increase of 7.91% over the same period last year, and net profit of 57 million yuan, a year-on-year decrease of 13.81%. [Comment] The expansion of new stores and the opening of innovative stores boosted the year-on-year improvement in operating income. The company's revenue growth rate has been negative since 2013. The first quarter of 2018 achieved positive growth for the first time. The interim report continues the growth trend, and is expected to increase 7.91% over the same period last year. The reason for the increase in revenue is due, on the one hand, to the company's continued expansion of new stores. The number of stores increased to about 177 by the end of the reporting period. Compared with the increase of 13 stores in the same period last year, the number of stores increased by 7.93% year on year. On the other hand, through cooperation with Ali, the introduction of Hema and Taoxanda, new retail experiences and the number of online orders increased. A large amount of investment in the early stages of opening a store drags down profits. Even excluding the impact of share purchase expenses for the second phase of the employee stock ownership plan, the company's net profit in the first half of the year was still lower than the same period last year. The main reason was the large upfront investment and talent reserve investment in the company's innovation stores. The company plans to open 40 new stores in 2018. The rate of opening stores is expected to accelerate further in the second half of the year. It is expected that the cost of new stores will still put some pressure on the company's profits at that time. The company's revenue for 18/19/20 is estimated to be 39.20/41.38/4.414 billion yuan, net profit of 1.15/1.24/136 million yuan, and EPS of 0.28/0.30/0.33 yuan, corresponding to PE 57.39/53.29/48.65 times, covering the first time, giving it a “neutral” rating. [Risk Warning] The overall macroeconomic downturn; the effects of the new business format fell short of expectations.