Traditional retailers accelerate transformation to defend against CGB 

We forecast community group buying (CGB) to reach a GMV of Rmb223 in 2021 and Rmb325bn in 2022, representing about 3% of fresh food retailing in 2021. Furthermore, CGB, which integrates ecommerce, mobile ordering and social networks into the traditional retail sector could be a wake-up call for un-digitalised retailers and thereby further increase competition in ecommerce channels (China 360's report). We maintain our Neutral rating on Sun Art. We are positive on its multi-format-driven top-line growth (RT-mini, online business, CGB supply chain), especially by leveraging BABA’s digital capabilities, but cautious on near-term profit burdens from investments in new initiatives. We downgrade Yonghui to Sell given its deficient execution, especially when competition has intensified, including decelerated store expansion, GPM pressure from the price war and a service business slowdown, as well as the limited profit visibility on the growing online business.