Key investment points: The company's performance has been growing steadily, and net profit has increased 37% year-on-year, in line with expectations. 1) The first half of 2018 achieved operating income of 1 billion yuan, an increase of 23.3% over the previous year; net profit of the mother was 140 million yuan, an increase of 37.4% over the previous year, mainly due to the fact that Xiaozi Technology began merging in December '17. 2) Excluding the influence of Xiaozi Technology, the footwear business achieved operating income of 880 million yuan in the first half of 2018, an increase of 8% over the previous year; net profit of the mother was 91.52 million yuan, a decrease of 9.4% over the previous year. Mainly due to the company's high base in the first half of '17 and the payment of 8.97 million yuan in idle land expenses this year, excluding this influence, the net profit of the footwear business was basically the same as the same period last year. 3) 18Q2 achieved operating income of 530 million yuan, an increase of 20% over the previous year; net profit of 63.26 million yuan, a year-on-year decrease of 6.1%, minus non-net profit of 66.66 million yuan, an increase of 15.7% over the previous year. Mainly because the company has increased its marketing and publicity efforts and continuously strengthened its brand influence, all expenses have increased, and the growth rate has slowed down somewhat. Gross margin declined slightly, period expenses were well controlled, net interest rates rebounded, and asset quality was good. 1) Good cost rate control led to a slight recovery in net interest rates. The gross margin for the first half of '18 fell 1.3 pct to 58% from the same period last year, mainly because Xiaozi Technology's gross margin was only 44%, but the company's overall gross margin was still high. At the same time, the sales expense ratio decreased by 1.3 pct to 28% compared to the same period last year, and the management expense ratio decreased by 1.4 pct to 12% compared to the same period last year. Net interest rate rebounded 1.7pct to 14.1% from the same period last year. 2) Good asset quality and steady cash flow. In the first half of 2018, inventory decreased by 14 million yuan to 400 million yuan from the beginning of the year; net operating cash flow was 190 million yuan, up 7% year on year, and asset quality continued to improve. Omni-channel efficiency has been clearly improved, and brand power and channel power have been continuously strengthened. 1) Continuously improve the offline channel structure. The company continues to close inefficient stores. As of the first half of '18, the number of company stores decreased by 23 from the beginning of the year to 1904, of which 1,327 were directly operated (26 new) and 577 were registered (31 were cleared). In the face of a decrease in stores, offline revenue increased 10% year over year to 750 million yuan, and store efficiency improved markedly. 2) Online business continues to grow rapidly. In the first half of 2018, online revenue reached 130 million yuan, up 16.3% year on year. Revenue accounted for 14.4% of the footwear business, and gross margin increased 3.4 pct to 59% over the same period last year. Kidz technology is developing rapidly, and digital marketing has helped upgrade the footwear business. 1) Kids Technology continues to grow rapidly, and performance promises are expected to be exceeded even further. In the first half of '18, Xiaozi Technology achieved revenue of 130 million yuan and net profit of 46.48 million yuan, and continued to maintain a rapid growth trend. The 18-year performance promise was 84.5 million yuan. The first half of the year was 55% completed. The second half of the year was the peak advertising season for advertisers, and it is expected that the full-year performance promise will be exceeded once again. 2) The cooperative relationship is good, and the demand for advertising is stable. As a marketing agent for 10 apps, including AppBao and Pea Pod, Xiaozi Technology has a daily distribution volume of up to 500,000; at the same time, it is connected to many mobile advertising platforms such as Baidu and maintains long-term cooperation, with an average of over 200 million programmatic advertisements displayed per day. 3) Digital marketing helps upgrade the main business. The company uses the advantages of Xiaozi Technology's user portraits to accurately match users and expand the consumer base; at the same time, it deeply cultivates existing users, increases the repurchase ratio and sales conversion rate, and promotes the company's business growth and channel upgrading. The company is a leader in high-end women's shoes in China and has built a multi-brand market group. Net profit is expected to grow by 50% + in 2018, corresponding to PE only 14 times, and maintain the “increased holdings” rating. The company continues to optimize offline stores, and store efficiency has improved markedly; the online scale continues to increase, maintaining a rapid growth trend. Join hands with Kid Technology to build a precise marketing system to enhance customer stickiness. Synergistic effects can be expected. Maintaining the original profit forecast, net profit for 18-20 is expected to be 2.9/3.4/380 million yuan, corresponding to EPS of 0.67/0.78/0.89 yuan, PE 14/12/10 times, maintaining the “increase in holdings” rating.