1-3Q2018 revenue increased 9.71% year on year, net profit decreased 15.78% year on year. On the evening of October 26, the company announced the 2018 three-quarter report: 1-3Q2018 achieved operating income of 3.142 billion yuan, a year-on-year increase of 9.71%; realized net profit of 79.94 million yuan, equivalent to an overall dilution of EPS of 0.15 yuan, a year-on-year decrease of 15.78%; achieved net profit of 66 million yuan, a year-on-year decrease of 17.88%, in line with expectations. Looking at the quarterly split, the company achieved operating income of 1,065 billion yuan in 3Q2018, an increase of 13.39% over the previous year, and realized net profit of 2.31 million yuan, a decrease of 20.30% over the previous year. The consolidated gross margin increased by 0.51 percentage points, and the period expense ratio increased by 1.29 percentage points. 1-3Q2018, the company's comprehensive gross margin was 23.92%, up 0.51 percentage points from the previous year. The 1-3Q2018 company's expenses for the period were 20.46%, up 1.29 percentage points from the previous year. Among them, the sales/management/finance expense ratio was 18.00%/3.06%/-0.60%, respectively, changing 0.82/ 0.51/ -0.04 percentage points from the previous year. Among them, the increase in the management expense ratio was mainly due to the increase in the cost of business innovation and expansion of reserve personnel during the reporting period, as well as the corresponding expenses for awarding share purchase funds for the second phase of the employee stock ownership plan in the first half of the year. Many new small-format stores were opened in the third quarter. Ali's synergy gradually penetrated 3Q2018 and the company opened 10 new stores, all of which were small-format stores. Since the beginning of the year, 28 stores have been opened. Currently, 12 stores have been signed to open, and it is expected that it will achieve the goal of opening 40 stores throughout the year. The company's additional distribution was successfully completed, and Alibaba Zetai became the company's second largest shareholder with a ratio of 32%. Currently, the fresh transformation of the company's stores is progressing steadily. With the further deepening of business collaboration between the company and Alibaba, the drainage effect of the company's stores and the revenue side improvements brought about by it are expected to accelerate. Profit forecasts were lowered due to changes in share capital, and the fresh transformation of the stores of companies with “neutral” ratings continued to advance, and revenue entered a positive cycle. Due to additional issuance, the company's share capital increased to 548 million yuan. Due to share capital expansion, we lowered our forecast for the company's fully diluted EPS in 18-20 to 0.18/ 0.18/ 0.20 yuan, respectively, corresponding to the EPS 0.24/ 0.24/0.27 yuan before the increase. The company currently has a high price-earnings ratio and maintains a “neutral” rating. Risk warning: The results of the new business format of cooperation with Ali did not meet expectations, and the CPI growth rate fell short of expectations.