Matters: On July 15, Xi'an Food and Diou Catering Management Co., Ltd. reached a preliminary cooperation agreement on matters such as business cooperation, shareholding or equity investment. On July 23, the company's major asset restructuring matters were reviewed and approved by the Reorganization Committee of the Securities Regulatory Commission. Trading of the company's shares will resume on July 24. Our comments on this are as follows: Comment: The partner company with Dior signed a letter of intent with natural person ****fa on July 15 to reach an agreement on matters such as business cooperation, shareholding, or equity investment with Dior companies controlled by the other party. The agreement only represents preliminary intentions, and there is still uncertainty about whether cooperation and cooperation methods can finally be reached in the future. Dior mainly deals in the coffee and Western food business, and has 3 brands (Dior, Miro, Ueshima) and 1 food factory. Among them, Dio Coffee was a well-known trademark in China in 2008, with outstanding brand advantages. In 2009, it received an investment of 21 million US dollars from Carlyle Group. Dior has 686 stores nationwide, mostly in Tier 1 and 2 cities, and consumes 50 to 70 yuan per capita. It is a mid-range Western-style restaurant brand loved by the public. In 2014, Dior achieved sales revenue of 194 million yuan. Since Dior's stores are mainly franchisees and only 28 direct-run stores, revenue is relatively low. After grafting through the capital platform, the company is expected to accelerate expansion and achieve rapid revenue growth. In 2014, Dior had a total profit of 21.34 million yuan, a net profit of 15.82 million yuan, a net profit margin of 8.15%, and strong profitability (Quanjude 7.5%, Jiahe Yipin 3.2%). In the letter of intent for cooperation, the two sides agreed to support each other in expanding the store area and draw on their respective strengths in product production, sales, management, logistics, etc., to form complementary advantages. The company will also support the improvement of Dior's corporate governance and shareholding structure. After Xi'an Food acquired Jiahe Yipin, its business layout has expanded from Xi'an to Beijing and North China. If it successfully cooperates with Dior, the company layout will be further expanded to southeast and southwestern provinces such as Shanghai, Jiangsu, Guangdong, and Yunnan, making the national restaurant layout more complete. Dior is a casual restaurant with coffee as its main feature, and the company's product range will also be expanded after cooperation between the two parties. At the same time, it is also a mid-tier mass catering enterprise. There is also room for collaboration between the two sides in the fields of channels, management, and logistics. After a major restructuring meeting, the new chapter of transformation, which will launch the company's proposed non-public offering of shares to acquire 100% of Jiahe Yipin's shares, was conditionally reviewed and approved by the Restructuring Committee of the Securities Regulatory Commission. With this acquisition, the company will enter the fast food market in Beijing and transform its popular catering strategy into another city. On the one hand, the company will bring immediate performance improvements to the company through this acquisition. On the other hand, it is expected to use Jiahe Yipin's technical and business advantages to connect to the Internet, achieve O2O in catering, open up business space, greatly enhance the company's operating capacity, and form clear benefits. The management discussions in the 2014 Annual Report sent a positive signal, proposing to promote capital operations, accelerate epitaxial expansion, and have a strong desire to grow bigger and stronger. After this major restructuring matter is reviewed by the Securities Regulatory Commission, it is expected that the company's transformation will be further accelerated, and the comprehensive layout including regular meals, fast food, and casual dining is expected to continue. The company is expected to continue mergers and acquisitions in the future, which is expected to open up room for growth in performance and market capitalization. Risk factors After the acquisition, business integration was slower than expected; the transformation of the business structure led to an expansion of short-term investment and increased performance fluctuations, and the risk of increased stock price fluctuations due to fluctuations in valuation in the Internet sector; food safety risks, etc. The investment proposal considers the merger of Jiahe Yipin throughout the year to maintain the company's profit forecast of fully diluted EPS in 2015-2017 at 0.06/0.09/0.13 yuan. The current stock price corresponding to 2016 PE is 86X. The company's valuation is not low from a PE perspective alone, but the company has expectations of continued mergers and acquisitions, and has benefited from the “Belt and Road” theme catalysis. The travel sector increased 26% during the suspension period, and there was a certain demand to make up for the increase, maintaining the “increased holdings” rating.