The company's 2018 revenue increased 8.15% year on year, achieving net profit of 202 million yuan. On the evening of April 15, the company announced its 2018 annual report. In 2018, the company achieved operating income of 11.414 billion yuan, an increase of 8.15% over the previous year. Net profit of 202 million yuan was realized, which was converted into fully diluted EPS of 0.23 yuan, a year-on-year decrease of 48.78%. Looking at the quarterly split, 4Q2018 revenue increased 11.67% year on year, an increase greater than the 11.57% increase in 3Q2018, and the net profit of 4Q2018 was -95 million yuan. The performance fell short of expectations. The main reason was that Lotte stores acquired by the company opened one after another in the second half of 2018 and were still in the market cultivation period. The company began to bear fixed expenses such as rent, utilities, and labor costs for these stores, which led to a sharp increase in expenses. The gross margin in 2018 increased by 2.49 percentage points, and the cost ratio for the period increased by 4.19 percentage points, and the company's comprehensive gross margin in 2018 was 22.45%, up 2.49 percentage points from the previous year. The company's expenses for the period in 2018 were 18.21%, up 4.19 percentage points from the previous year, of which the sales/management expense ratio increased by 2.63/ 1.61 percentage points, respectively, from the previous year. The department store business has regional advantages. After the acquisition of stores and opening, the scale of operations was significantly expanded. The company had more than 40 large retail stores, which had regional advantages in Shandong and surrounding regions. These stores achieved operating income of 10.795 billion yuan in 2018, an increase of 2.40% over the previous year, and net profit of 435 million yuan, an increase of 10.37% over the previous year. In 2018, the company acquired 72 Lotte stores in East China, and renamed 44 of them “Liqun Era” and reopened in the second half of 2018. These stores are still in the market cultivation period. In 2018, the company added 607 million yuan in revenue and net profit of -235 million yuan. By the end of 2018, the company had a total of 87 large retail stores with a total operating area of more than 2 million square meters. Lower the profit forecast and maintain the “increase in holdings” rating. We believe that after the Lotte store acquired by the company reopens, store development, supply chain integration, etc. will cause expenses to be high in the next few years. We lowered our forecast for the company's EPS for 2019-2020 to 0.24/ 0.26 yuan (previously 0.40/ 0.42 yuan), respectively, and added a forecast for the company's 2021 EPS of 0.29 yuan. The company is currently in a stage of leapfrog development, and the scale of operations has expanded significantly, gradually moving from a regional commercial group to a national commercial group. Currently, the company's PB (2019E) is 1.5X, which is significantly lower than the average for the past three years (1.9X), maintaining an “increase in holdings” rating. Risk warning: The integration of acquired stores fell short of expectations, and competition in the regional retail market intensified.