Key investment points: The company's performance grew steadily, and net profit increased 29% year-on-year in 2018, slightly lower than expected. 1) The company's performance has maintained steady growth. In 2018, it achieved operating income of 2.05 billion yuan, an increase of 18.4% over the previous year; realized net profit of 240 million yuan, an increase of 28.9% over the previous year, and net profit after deducting 210 million yuan, an increase of 27% over the previous year, mainly due to the combined influence of Xiaozi Technology. 2) The net profit of the main footwear business declined. Excluding the influence of Xiaozi Technology, the revenue of the main footwear business increased 2.3% year on year to 1.74 billion yuan in 2018, and net profit from the mother decreased 22% year on year to 140 million yuan, mainly due to the increase in expenses due to the payment of $8.97 million in idle land expenses in 2018 and increased marketing and publicity efforts. 3) The growth rate slowed slightly in the fourth quarter. 18Q4 achieved operating income of 580 million yuan, an increase of 10.4% over the previous year, and net profit of 55.7 million yuan, an increase of 15% over the previous year. 4) The dividend ratio is relatively stable. The company paid a dividend of 2.5 yuan for every 10 shares. The dividend ratio reached 43%, and the dividend rate was about 2.4%. Gross margin declined slightly, period expenses were well controlled, net interest rates increased steadily, and asset quality was healthy. 1) The 18-year gross margin decreased by 1.7pct to 56% compared to the same period last year, mainly due to the merger of Xiaozi Technology. The sales expense ratio decreased by 1.4pct to 28.6%, and the management expense ratio (including R&D expenses) decreased by 0.8pct to 13.5%, driving the net interest rate to increase by 1.2pct to 11.9%. 2) The number of days of turnover of accounts receivable in 2018 decreased by 3 days to 58 days compared to the same period last year; the number of inventory turnover days decreased by 21 days to 180 days compared to the same period last year. At the same time, operating cash flow increased by 33.56 million yuan to 300 million yuan over the same period last year, and asset quality was relatively healthy. Adhere to the multi-brand strategy and create a complementary brand matrix. 1) The main brand KISSCAT continues to adjust. In 2018, KISSCAT achieved revenue of 840 million yuan, a year-on-year decrease of 4.8%. In 2018, the net number of stores was 44 to 1007 (660 directly-managed stores and 347 franchisees), and the revenue of a single store was basically the same as the same period last year. 2) Mid-range and high-end brands ZsaZSu and Tigrisso continue to grow rapidly. In 2018, zsaZsazSU achieved revenue of 150 million yuan, an increase of 23% over the previous year. In 2018, there was a net increase of 34 stores to 146 (137 directly+9 franchisees). In 2018, Tigrisso achieved revenue of 4.6 billion yuan, an increase of 14% over the previous year. In 2018, there was a net increase of 9 stores to 427 (326 directly+101 franchisees), and the growth rate of the same stores is expected to exceed 10%. 3) KissKitty, which positions itself as “trendy and fun,” has been adjusted. In 2018, KissKitty achieved revenue of 170 million yuan, a decrease of 15% over the previous year. In 2018, the net number of stores ranged from 10 to 255 (190 directly+65 franchisees), and the growth rate of the same stores declined. 4) Other brands are growing steadily. In 2018, other brands achieved a total revenue of 120 million yuan, an increase of 25% over the previous year. In 2018, there was a net increase of 9 to 90 stores (64 directly+26 franchisees), and the growth rate of the same stores is expected to exceed 10%. Offline stores continued to adjust, and e-commerce channels recovered in the fourth quarter. 1) The offline channel structure continues to be optimized, and the number of stores is expected to achieve a net increase in 2019. The total number of company stores in '18 was 1925, which is basically the same as the same period last year. Among them, the number of direct-run stores reached 1,377, a net increase of 91, accounting for 72%; the number of franchise stores was 548, with a net turnover of 93. 2) Active adjustments online, showing a recovery trend. In 2018, online revenue was 250 million yuan, up 8% year on year. Among them, e-commerce revenue in the fourth quarter was about 88.12 million yuan, up 7.2% year on year. There is a marked improvement over negative growth in the third quarter. It is expected that e-commerce will improve quarterly in 2019. Xiaozi Technology continues to exceed expectations, and its main footwear business is increasing intelligent manufacturing and building a flexible supply chain. 1) Kids Technology has continuously exceeded its performance commitments. In 2018, Xiaozi Technology achieved revenue of 300 million yuan, an increase of 31% over the previous year; realized net profit of 100 million yuan, an increase of 47% over the previous year, and exceeded its performance promise for the second year in a row (the 18-year commitment to achieve net profit of 84.5 million yuan). 2) Issuance of 600 million yuan of convertible bonds to increase intelligent manufacturing. The company plans to issue 600 million yuan of convertible bonds to build an intelligent manufacturing base, 4 automated intelligent production lines and 4 flexible production lines to improve the level of automated, digital and intelligent production supply chains. The company is a leading enterprise in the women's shoes industry. The offline channel structure continues to be optimized, and growth is gradually resumed online, driving continuous growth in performance and maintaining the “increased holding” rating. The company's offline stores have been adjusted. It is expected that there will be a net increase in the number of stores in '19. After adjustments, online recovery began in the fourth quarter and improved quarterly in '19. Considering that the number of the company's stores was slightly lower than expected, the profit forecast for 19-20 was lowered and the 21-year profit forecast was added. The estimated net profit for 19-21 was 2.8/3.2/3.7 billion yuan (previously 3.4/380 million yuan), corresponding to EPS of 0.64/0.74/0.85 yuan, and PE of 16/14/12 times, maintaining the “increase in holdings” rating.