The 2018 results were in line with expectations. The 1Q19 results exceeded expectations, and Lai Yifen announced the 2018 results: operating income increased 7% to 3.89 billion yuan, net profit decreased 90% to 10.11 million yuan, corresponding to earnings per share of 0.03 yuan, which is in line with the performance report. The company plans to distribute a cash dividend of 1.5 yuan (tax included) for every 10 shares. 1Q19 revenue also fell 0.1% to $1.19 billion, and net profit increased by 53.2% to $64.84 million, corresponding to earnings per share of $0.19. The profit performance for the first quarter exceeded market expectations. Development trend The revenue growth rate in '18 has been affected by strategic adjustments and is expected to accelerate in '19. The company's revenue increased by 7% in 2018, which is a slight slowdown from the growth rate in '17, mainly due to its own proactive omni-channel strategy adjustments. By the end of '18, the number of directly managed stores by the company had increased 6% to 2,381, and the number of franchise stores increased by 52% to 316, and the total number of stores was 2,697. The store expansion plan fell short of expectations at the beginning of the year, leading to a slowdown in the growth rate of offline revenue; while the growth rate of online e-commerce revenue also slowed to 10%. We believe that the company's omnichannel strategy adjustments have basically been put in place in 1Q19. We expect that the company's revenue in 2019 will benefit from accelerated store expansion and the opening up of all omnichannel links, showing accelerated growth. Profit in '18 was mainly dragged down by rising costs, and 1Q19 has shown a marked improvement. The company's net profit declined sharply in 2018, mainly due to the company's increased investment in omnichannel marketing and increased management and technical personnel reserves. The increase in app developers, marketing, and information personnel led to a marked increase in the cost rate: among them, the sales expense ratio was +2.5ppt to 32.9% year on year, and the management expense ratio was +1.8ppt to 11.1% year on year. At the same time, the increase in marketing investment also led to gross margin of -0.4ppt to 43.9% year-on-year. We believe that after the company's omnichannel strategy adjustment in 2018, the effects of cost investment will gradually be reflected in future revenue growth, while more attention will be paid to cost control in 2019. In 1Q19, the company's gross margin was +2.6ppt year on year, sales expense ratio was -0.3ppt year on year, and net profit margin was +1.9ppt to 5.4% year on year, showing a marked improvement trend. We expect the company's profit performance to show a restorative and rapid growth trend in 2019. The profit forecast was mainly due to the fact that the recovery in 1Q profit levels exceeded expectations. 1Q19 EPS reached 0.19 yuan, so the 19/20 EPS forecast was raised from 0.05/0.1 yuan to 0.31/0.37 respectively. Valuation and recommendations Since the company's profit margin has not returned to normal levels, using the P/S valuation method, the company's current stock price corresponds to 0.95/0.84 times P/S in 19/20, giving 1.1 times P/S in 19, and increasing the target price by 33% to 15.2 yuan, corresponding to 1.1/0.95 times P/S in 19/20. The current stock price still has 15% room to maintain a neutral rating. Increased competition in risk markets, risk of regional expansion, risk of franchisee management, fluctuations in raw material prices, food safety risks.