1H19 revenue was in line with expectations, and performance fell short of expectations. The company announced 1H19 results: revenue of 2.04 billion yuan, +2.3% year-on-year; net profit of 44.47 million yuan, +20.2% year-on-year, corresponding to earnings of 0.13 yuan per share. Among them, revenue for the 2Q19 quarter was +5.7% year-on-year, in line with expectations. Net profit loss for 2Q19 was 20.36 million yuan, and net profit after deduction of net profit was 28.48 million yuan, which reduced losses, mainly due to limited month-on-month increase in gross margin and a decrease in non-operating income, the performance performance fell short of expectations. Development trend 2Q19 revenue increased slightly month-on-month, and 2H19 is expected to accelerate growth. The company's 2Q19 revenue also increased by 5.7%, achieving rapid month-on-month growth compared to 1Q19 during the off-season, benefiting from the online and offline omni-channel layout of the sales network, and the company's active use of offline store resources to build a takeout self-operation system and develop community groups and other businesses. As of 1H19, the number of directly managed stores by the company increased by 1.6% to 2,389, and the number of franchise stores increased by 19% to 328, bringing the total number of stores to 2,717; e-commerce revenue also increased by 20%. We believe that the company's omni-channel strategy has been basically adjusted in 1H19, and 2Q19 has shown some improvements. We expect that in the second half of the year, the company's revenue will benefit from accelerated store expansion and accelerated growth. The 2Q19 gross margin was under pressure year on year, but the month-on-month improvement trend continued. The company's 2Q19 gross margin was 45.2%, year-on-year -1.2ppt, mainly due to the difficulty of reflecting the scale effect of costs during the off-season and the low level of gross margin in the early stages of developing new businesses such as takeout and community group buying; +0.9ppt compared to the previous month, continued the trend of improving quarterly, benefiting from the steady growth rate of offline high-margin channels and product structure upgrades. We believe that the company's gross margin level in the second half of the year is expected to benefit from accelerated growth on the revenue side, enjoy cost scale effects, and achieve a year-on-year recovery due to product structure upgrades. The 2Q19 expense ratio continued its downward trend, and operating profit reduced losses. The company's 2Q19 sales expense ratio was 34.8%, -0.5ppt, and the total management+R&D expense ratio was 12.8%, year-on-year -2.2ppt. We believe that the company has already invested in systems such as the omni-channel system and business center in the early stages, so the current cost rate will benefit from the relative reduction in cost investment and scale effects to achieve a year-on-year decline. The company reduced operating profit and losses in 2Q19, and achieved loss reduction in non-net profit after excluding the impact of reduced non-operating income. We believe that although the improvement in the company's 1H19 performance was limited, it is already in a steady state, and we look forward to accelerated growth in the second half of the year. The profit forecast and valuation maintain the 2019/2020 EPS forecast of 0.31/0.37 yuan. 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 0.97/0.84 times P/S in 19/20, maintaining a target price of 15.2 yuan, corresponding to 1.1/0.95 times P/S in 2019/2020. The current stock price still has 13% room, maintaining a neutral rating. Increased competition in risk markets, risk of regional expansion, risk of franchisee management, and risk of food safety.