Offline marketing and increased IT spending lead to operating profit not expected

The goods will again release outstanding quarterly revenue, further proof of the attractiveness of the purchase in China and the company's dominant position in this field. The company sharply increased its spending on television advertising and IT systems in the second quarter of this year, leading to lower operating margins than expected. We expect investors to focus on competition, logistics expansion and terms of cooperation with suppliers in the upcoming earnings conference call.

Flash-shopping continues to lead China's e-commerce market growth, with revenue exceeding expectations

As product breadth and depth continue to expand, only the second quarter of the goods will again strong growth to 351 million U.S. dollars, the year-on-year growth of 160%, compared with Deutsche Bank and Wall Street average forecast is about 4% higher. The number of active users increased from 1.5 million in the same period last year to 3.5 million, up 139%, and total orders increased from 4.7 million in the same period last year to 11 million, up 136% per cent.

Offline marketing and IT investment squeeze profit space

As the scale effect grew, gross profit in the second quarter was $83 million trillion, more than Deutsche Bank's forecast of $80 million and Wall Street's average of $79 million trillion, but as the company aggressively launched television commercials and other offline ads, the pre-tax profit calculated by US GAAP (EBIT) For 7 million dollars, an increase of 224% per cent year-on-year, 26% and 15% lower than Deutsche Bank forecasts and Wall Street forecasts respectively. The company also invested a lot of money in IT systems such as ERP and CRM, much more than we expected.

Acknowledging that only goods will dominate the market of flash purchase

We set the target price up to 43 dollars. While we have cut earnings per share (EPS) by 14% and 7% respectively in 2013 and 2014, we have raised the P/E ratio from 0.6 times to 0.7 times times in view of its dominance in China's flash-buying market. Risk: Large e-commerce companies into the flash market brought about by the competition to stop/intensify, logistics expansion success/delay, return to reduce/improve.