2018H1: The acceleration of exhibition stores led to revenue growth and a decline in net profit. Revenue was 2,077 billion dollars, +7.91% yoy, Q1/Q2 was 11.15/962 million, growth rate +6.32%/+9.82% respectively; net profit of 57 million, -13.81% yoy, Q1/Q2 was 0.38/019 million, growth rate -4.69%/-28.07%, Q1/Q2 opened 6/12 new stores respectively. Net profit declined due to early investment; net profit declined due to early investment; net profit declined during the period; it received 17 million government subsidies during the period, deducted from the non-return net profit of 44 million, -22.y, yo2.y 1/ Q2 was 0.38/06 million, respectively, with a growth rate of -2.6%/-64.9%; EPS was 0.14 yuan/share; net cash flow from investment activities in the current period was -47 million yuan, -87.03% year-on-year, mainly due to the increase in purchasing outlets, new store decoration and equipment procurement costs in the current period. Revenue side: Fresh sales growth accelerated & showrooms accelerated, driving up overall revenue. Revenue during the period was 2,077 billion yuan, +7.91% yoy, supermarkets (including innovative stores) 1,871 billion, +5.97% yoy; small business format 121 million, +43.97% yoy. Store opening situation: Supermarkets (including innovative stores) /small businesses opened on 3/15, 15 new stores in Ningbo, 3 in Hangzhou, signed for 5/9, all located in Ningbo, 19/21/18 new stores opened throughout the 15-17 year, and 18H1 showrooms accelerated; 3 stores were closed in the current period due to property expiration and operating conditions restrictions, etc., for a total of 184 stores at the end of the period. Profit side: Ali's gross margin of entry has improved markedly. Relying on the advantages of joint procurement to enhance bargaining power, and rationally control procurement costs. ① The gross profit margin for 16Q3 was 20.91%, 17Q1 rapidly increased to 22.65%, and 18H1 reached 23.88%, +0.83 pct over the previous year. Among them: supermarkets (including innovative stores) in and out of Ningbo were 21.21%/17.69%, with a year-on-year +0.96pct/+0.24pct, showing an increasing trend; the share of small business in and out of Ningbo was 21.93%/21.23%, showing a downward trend. ② The total cost of the three items was 422 million, +18.37% year-on-year, and the period fee rate was 20.33%, +1.8pct year-on-year. Among them: the sales expense ratio was 17.59%, +0.99pct; the initial investment in innovative stores and new store expansion continued to increase, and the transformation of old stores caused certain expenses; the management cost rate was 3.23%, the year-on-year +0.72pct; the cost of reserve talent increased due to business innovation and expansion, and the current period spent on the purchase of shares in the second phase of the employee stock ownership plan, with a total labor cost of 46 million yuan, +46.33%; the financial cost rate -0.49%, y-o-y, +0.08pct. Net profit for the current period was $57 million, -13.81% year-on-year, mainly due to the large upfront investment in new stores. Leading local supermarket chains in Zhejiang, with 184 stores beginning to have a scale advantage, Ali empowers them to accelerate the all-round optimization of retail models, open up omni-channel collaborative development with “new technology+big data”, and stimulate human efficiency through a comprehensive assessment system. Maintain profit forecasts and maintain “buy ratings.” Deeply involved in the Zhejiang market, with a misplaced layout of “supermarket+innovative store+small business format”, introduced Ali to accelerate new retail transformation, and use the Internet to deepen omni-channel integration. Employee stock ownership plans demonstrate confidence in development. Overall, the company's net profit for 2018-20 is 1.3/15/ 170 million, respectively. The current market value corresponds to 44/40/35*PE, maintaining the buying rating. Risk warning: The effect of improving gross margin did not meet expectations, and the incubation period for new stores was extended.