After the marketing reform, the development of the company has entered a new stage, maintaining the "buy" rating. Lingrui Pharmaceutical is a leading domestic plaster enterprise. The first marketing reform improved the layout and laid the foundation for rapid growth for the second reform. With the effectiveness of marketing integration, steady growth of core products Tongluo Qutong Ointment, upgrading of Zhuanggu Musk pain Ointment, successful price increase of three major general medicines, rapid volume of primary care varieties. The development of the company will enter a new stage, and we raise our profit forecast for 2021-2023. It is estimated that the net profit of 2021-2023 will be RMB 3.86 million / 4.55 billion / 5.72 million, respectively, and the EPS will be RMB 0.68 trillion, respectively. The current stock price will be 12.8 times of PE, respectively, maintaining a "buy" rating. The company is expected to enter a new stage in the development of the company, and we will raise our profit forecast for 2021-2023, with a net profit of RMB 3.86 million / 4.55 (formerly 4.53) / 5.72 million (formerly 5.54), respectively.

The second marketing reform in 2021 simplifies the layout, improves quality and efficiency companies implement stock incentive plan and employee stock ownership plan in 2021. Set up the performance evaluation standard of deducting non-net profit (excluding equity incentive fees) with an annual growth rate of 20%, 20% and 15% respectively from 2019 to 2023. The company's first marketing reform in 2012 increased investment and improved layout, and achieved remarkable results, but due to increased marketing investment. The sales expense rate basically keeps pace with the gross profit margin, thus opening the second marketing reform to simplify the layout, improve quality and increase efficiency. We expect the company's marketing efficiency to continue to improve, and the sales expense rate is expected to decline steadily.

With the steady growth of Tongluo Qutong ointment and the upgrading of Zhuanggu Qutong ointment, the price increase of general medicine is expected to quickly reflect the rapid expansion of the OTC end channel of Tongluo Qutong ointment, and match the sales of Huoxue Xiaotong tincture, change the number of OTC terminals at the same price to enhance profitability, and it is expected to maintain steady growth in the future. Zhuanggu musk analgesic ointment is replaced by high-quality products, the price is increased from 0.3-0.5 yuan / paste to about 2-3 yuan / paste, the proportion of high-quality sales has increased steadily, and it is expected to achieve rapid growth. The single paste prices of the old products Zhuanggu musk analgesic ointment, dampness analgesic ointment and joint analgesic ointment all increased, and basically did not bring the backlog of channel inventory, and it is expected that the performance thickening brought about by the price increase will be reflected in the statement end quickly.

Grass-roots medical end to increase marketing promotion, increase the supply of varieties, it is expected that after the rapid expansion of marketing reform, the company will increase the marketing promotion of grass-roots health care, more oral drug products are suitable for promotion at the grass-roots level, and the company gradually resumes production and re-registers some varieties. To increase the supply of varieties, we believe that, benefiting from this marketing integration, the sales volume of primary health care products is expected to meet rapid growth.

Risk hint: product sales are not as expected; market competition plus