Revenue from the footwear business increased 2.3% year-on-year in 2018. Among them, offline has completed a nationwide layout, and the direct channel structure has been optimized and adjusted effectively. The number of channels increased slightly while the quality of the same stores improved; revenue from franchise channels declined due to the closure of inefficient stores; online channels used kid technology to improve digital operation capabilities and maintain steady growth. Kid Tech also boosted the overall revenue growth rate to 18%. The profit side was also affected by the consolidation, and the overall growth rate increased to close to 29%. Currently, the company has a total market value of 4.4 billion dollars, corresponding to 19PE16X. The short-term valuation is reasonable. In the long run, the company is in the second tier after Belle Series. Team operation capabilities are at the leading level in the industry. While the main business is growing steadily, the synergy benefits with Xiaozi Technology in the field of digital operations are expected to be further exploited and maintain a prudent recommendation rating. Revenue growth in the footwear business has slowed, and Xiaozi Technology has combined to increase revenue and profit elasticity. In 2018, the company achieved revenue, operating profit, and net profit to mother of 2,052 million yuan, 290 million, and 242 million yuan, respectively, up 18.37%, 26.59%, and 28.87% year-on-year respectively, with basic earnings of 0.56 yuan per share; the dividend plan was to distribute a cash dividend of 2.5 yuan (tax included) for every 10 shares. Excluding mergers, the company's main business revenue increased 2.3% to 1,749 million yuan, and net profit decreased 21.21% to 142 million yuan. The 18Q4 company achieved revenue, operating profit, and net profit to mother of 584 million, 58 million, and 56 million respectively, with year-on-year increases of 10.35%, 8.68%, and 14.97%, respectively. Footwear business revenue increased 2.3% year over year to 1,749 billion yuan, which is significantly slower than in 2017. 1) Looking at each channel, the decline in franchising dragged down offline business revenue performance; the synergy between e-commerce and Xiaozi Technology was evident, achieving steady growth. Offline: Offline channel revenue increased 1.41% year-on-year to 1,488 billion yuan in 2018, accounting for 85.38% of revenue. Among them, revenue from direct-run stores increased 4.86% year on year to 1,300 billion yuan, the number of stores increased net by 91 to 1,377; franchise revenue decreased 17.44% year over year to 188 million yuan, and the number of stores decreased net by 93 to 548. Online: Taking advantage of Xiaozi Technology's advantages in Internet digital marketing technology, accurately matching users, developing potential users while deepening the stock of users, and increasing the repurchase rate. E-commerce channel sales revenue increased 7.91% to 255 million yuan, accounting for 14.62% of revenue. 2) Performance differentiation of the four major independent brands: Kisscat achieved revenue of 840 million yuan (-4.75%), net closing of 44 to 1007 stores; zSAzSazsu grew rapidly, achieving revenue of 153 million yuan (+23.22%), net opening of 34 stores to 146; tigrisso revenue of 462 million yuan (+14.09%), net opening of 9 stores to 427; KissKitty's revenue of 165 million yuan (-14.81%), net closing of 10 to 255 stores; Other agency brands achieved revenue of 122 million yuan (+24.60%), with a net opening of 9 to 90 stores. The decline in the expense ratio during the period was greater than the decline in gross margin. Accrual of asset impairment losses increased, government subsidies increased, and the net profit margin increased by 1.22pct to 11.93%. 1) The low gross margin Kid Technology business also reduced the overall gross margin by 1.74 pct to 56.01%. Among them, the footwear business increased its comprehensive gross margin by 0.68 pct to 58.64% under measures to improve the efficiency of omnichannel retail operations, while strengthening cost control and improving the settlement rate of shopping malls. Among them, online gross margin increased by 0.72 pct to 57.50%, and offline gross margin increased by 0.69 pct to 58.84%. Kid Tech's gross margin was 42.26%. 2) The cost rate decreased by 2.03 pct to 42.05% during the period, with changes in sales rate/management rate/financial expense ratio of -1.37 pct/-0.79 pct/+0.14 pct, respectively. 3) Net profit increased 1.22pct to 11.93%, and net profit to mother increased 28.87% year-on-year to 242 million yuan under the combined influence of factors such as an increase of 14.62 million yuan in asset impairment losses and an increase of 14.8 million yuan in government subsidies during the period. Inventory and receivables turnover accelerated, and net operating cash flow increased. Overall, growth indicators were healthy. The volume of low inventory in '18 reached 483 million yuan, an increase of 15.56% over the previous year, and the number of inventory turnover days decreased by 20 to 180 days. The size of accounts receivable and notes reached $333 million, a year-on-year decrease of 4.47%, and the number of turnaround days decreased by 3 to 58 days. Net operating cash flow increased by $34 million to $304 million over the same period last year. Overall, the operating indicators were healthy. Xiaozi Technology is developing rapidly, and digital marketing is helping to upgrade the main footwear business: Xiaozi Technology is mainly engaged in mobile application distribution and programmatic promotion, and has independently developed platforms such as Yuzu Mobile SSP, DSP, DMP and many mobile internet marketing expertise; at the same time, it has also established business partnerships with many mainstream Internet companies including Baidu, Tencent, and Qihoo 360, and has established media pools covering various media such as head and long tail. In 2018, Xiaozi Technology's revenue increased 31% year on year to 304 million yuan, and net profit increased 47% year on year to 100 million yuan, fulfilling previous performance promises. Cooperation and synergy between the two sides have shown. The company uses the digital operation advantages of Xiaozi Technology to construct user profiles, accurately match users, increase repurchase rates and sales conversion rates, and promote online business growth. Profit forecasts and investment ratings. As a leading high-end multi-brand women's shoe group in China, the company has built a brand series that meets the needs of female customers of all ages and consumption levels. The offline nationwide layout has been completed, and the regional distribution is quite balanced. Currently, the optimization and adjustment of the direct management channel structure has shown results, the quality of the same store has improved, and inventory has been reduced; the franchise channel is still in the process of being adjusted; online channels use kid technology to improve digital operation capabilities, and revenue has maintained steady growth. EPS is estimated to be 0.64, 0.71, and 0.78 yuan respectively in 19-21. The current total market value is 4.4 billion yuan, corresponding to 19PE16X, and the short-term valuation is reasonable. In the medium to long term, the company is in the second tier after Belle series. The team's operating capabilities are at a leading level in the industry. While the footwear business is growing steadily, synergy effects with Kid Technology are expected to be further exploited to maintain “Prudent Recommendation -A”. Risk warning: The consumer environment continues to be sluggish, and the cultivation of multiple brands falls short of expectations.