Forecast Ltd's EPS in 2013-2015 years is 0.85 yuan, 0.99 yuan and 1.18 yuan respectively, corresponding to PE are 8.7X, 7.5X and 6.3X respectively. Although the economy still faces greater downside risks and terminal demand has not been improved, the company has sound operation, good profitability, low valuation, and a further risk of falling stock price. If the terminal is recovered, the elasticity will be greater and the recommended rating should be maintained.

　 Main points:

Active "wholesale" transformation of "retail" to service the brand value: in the first half of this year, the net number of stores opened was negative, even when the economy was in good condition, the number of shops opened in the first half of the year was generally zero. The market situation is not good. The company has also abolished the rigid indicators of new shops this year, and has changed to the help and support of decoration and subsidies. The process of pre scale expansion has come to an end. It is the main goal of this stage to do a good job in "wholesale" transformation and "zero sale". The company will pay more attention to how to pass the value of the brand from the service.

The continuous upgrading of inventory and the improvement of terminal profitability are the key: at present, the growth rate of direct business is higher than that of the order industry. The process of de stocking is determined, and the inventory in the channel is constantly being digested. Because of the high value of second-hand goods, the rate of sale of new goods has not increased significantly, and to a certain extent, it has dragged down the gross gross profit margin. The main problem of the terminal is low return on investment and sharp decline in profitability. This is also a common problem faced by the whole industry, not only the company itself.

The proportion of electricity providers continues to rise, mainly to inventory: the rapid development of the company's electricity business, revenue accounted for only a single digit last year, the proportion will continue to increase this year. In the future, the business of electronic commerce will be operated in a company. The role will still be based on the elimination of inventory, considering the reasonable proportion of network products and stabilizing gross margins. Due to online clothing If the consumption is difficult to try out clothes and there is time delay in receiving goods, the company will continue to promote the development of O2O mode, increase the interaction between online and offline, realize the transition of channels, and improve the convenience of online consumption.

The transformation of the industry mode, the intention to acquire mature brands: because the industry is facing changes in the profit model, the company will concentrate on the brand of the seven wolves, and the development of the new brand will be carried out mainly through mergers and acquisitions and supporting the original investment. First of all, the company has the intention to acquire mature brands, which can integrate new brands to achieve resource sharing, enhance the overall publicity ability of the company at the terminal, and also enhance the bargaining power of the company in selecting strategic suppliers, reduce production costs and increase the ability to resist risks. Second, the company will set up seven wolves investment fund to provide funding for entrepreneurs to carry out brand operation.

Risk factors: the economic fundamentals continue to deteriorate and affect clothing consumption.