Incident review Kaisa Beauty Group Limited (“Kaisa Beauty” or the “Company”) announced the acquisition on October 31. Acquired 51% of Jiangsu Hengyuan Property Management Co., Ltd. (“Jiangsu Hengyuan”) for RMB 34.1598 million. Based on this, we have communicated with the company's management. The reviews carefully recommend, with a target price of HK$22.05 per share. Based on Kaisa's recent acquisition of Jiangsu Hengyuan Property, we have adjusted the company's financial forecasts. Our new forecast shows that Jiangsu Hengyuan will increase Kaisa's revenue in 2019 and 2020 by 0.5% and 3.6% respectively. In terms of net profit, we predict that Kaisa Beauty will generate net profit of 146 million yuan and 201 million yuan respectively in 2019 and 2020, up 0.1% and 3.6% respectively from our previous forecasts. Based on our new forecast, our DCF model gives the company a price of HK$22.05 per share. Equivalent to 18.7x2019 PE and 13.5x 2020 PE. Since our initial coverage, the company's stock price has risen by 42.3%. We believe that the benefits brought by the acquisition have been reflected in the stock price, which in turn has given us a “prudent recommendation” rating. The purchase consideration was RMB 34.1598 million, with a corresponding valuation of RMB 66.98 million. Jiangsu Hengyuan's 2018 revenue was 75.874 million yuan and net profit was 5.809 million yuan. Its valuation corresponds to 0.9x of 2018 PS and 11.5x of 2018 PE, respectively. In addition, Jiangsu Hengyuan also made a performance commitment, that is, Jiangsu Hengyuan's 2022 revenue will increase 33% compared to 2018 revenue, while ensuring that the increase in operating costs for each year does not exceed 90% of the current year's revenue growth. Jiangsu Hengyuan's dual performance commitment to revenue growth and profitability has enabled the company's acquisition risk to be better controlled. Risk warning: 1) Unsuccessful business integration after acquisition; 2) Kaisa Group's business development falls short of expectations