Net profit in the first half of 14 fell 44.5 per cent year-on-year to HK $172.4, in line with expectations, while revenue fell 7 per cent year-on-year to HK $5.08 billion. Gross margin fell 1.9 percentage points to 56.4% as inventory clearance continued. Operating margins fell 4.0 percentage points to 4.7 per cent due to increases in marketing, rent and labour costs. The sales outlets of the main brands decreased by 1.3% to 6234 compared with the previous month.

Strive to inject vitality into the Daphne brand. Guo Xuefu joined Quan Zhixian and Nicholas Tse as another brand ambassador. At the same time, the company cooperated with the famous actor Gao Yuanyuan to set up a new brand called Yuanyang. Cross-brand shoes with Hello Kitty have also been released. All marketing efforts can promote sales growth in the middle line of the company. Same-store sales growth was flat in July and August, and star marketing strategies are harvesting.

Upgrade the rating to "collect" and raise the target price to HK $4.45. We raised our revenue forecast to reflect the impact of enhanced marketing. We increase our forecasts for sales, general expenses and administrative expenses to reflect upgrades in marketing expenses and increases in rental and labor costs, and we reduce diluted earnings per share for 14-15-16 by 22.5%, 26.3% and 16.6%, respectively, to reflect the latest operating data. We believe that the industry and the company's business have bottomed out and that the company deserves a higher valuation. We upgraded the company to "Collection" and raised the target price from HK $3.74 to HK $4.45, corresponding to 19.0 times and 17.0 times 14 and 15 diluted earnings per share, respectively.