Traditional Chinese medicine formula granule leader has obvious first-mover advantage, covering for the first time, giving a "buy" rating to the end of the pilot project of traditional Chinese medicine formula granule industry, and is expected to usher in a simultaneous rise in volume and price. Chinese traditional medicine accounts for half of the traditional Chinese medicine formula granule market and has obvious first-mover advantages. It is expected that priority will be given to the expansion of the industry. We estimate that the company's net profit from 2022 to 2024 will be 21.86pm 2.620pm respectively. The corresponding EPS is 0.43, 0.52, 0.64 yuan per share, and the current share price is 7.9, 6.6, 5.3 times the corresponding PE, covering for the first time, giving a "buy" rating.

The market of traditional Chinese medicine formula granules is expected to rise in both quantity and price, and the improvement of acceptance is the key to the expansion of traditional Chinese medicine formula granule from November 1, 2021, the pilot stage of traditional Chinese medicine formula granule will end, and the expansion of sales scope will bring about volume growth. the increase in equivalent cost and the price of raw materials will lead to an increase in price. We expect that traditional Chinese medicine formula granule will reach 65 billion yuan in 2024, with the increase in volume as the main driving force. The improvement of acceptance is the key to the expansion of the industry. With some provinces (cities, districts) hanging up the traditional Chinese medicine formula particles one after another, we think that the collection of traditional Chinese medicine formula particles is expected to accelerate the landing, but because the price of traditional Chinese medicine formula granules is not much higher than that of traditional Chinese medicine slices, it is expected that the price will not be reduced much in the future.

The company is the leader of traditional Chinese medicine formula granules, with advantages in upstream, production, sales and medical insurance. Traditional Chinese medicine accounts for half of the traditional Chinese medicine formula granule market, and has obvious first-mover advantages: it has the advantage of planting base of GACP traditional Chinese medicine in the upstream; the number of varieties on record at the production end is much more than that of competitors, sufficient production capacity and standardized production process. The sales end rapidly expands the customers of medical institutions by putting drug dispensing machines, and the income of stock customers increases steadily, and the medical insurance side is given priority to be included in the list of reimbursement enterprises. As a result, the company is expected to give priority to industry expansion.

The Chinese medicine big health whole industry chain forms the strong business cooperation, enhances the traditional Chinese medicine formula granule business competitiveness the company in the nationwide layout to build the traditional Chinese medicine big health whole industry chain, the 6 major industry forms product layout business cooperation is strong. Proprietary medicine plate in the clinical channel through evidence-based medicine research to maintain a leading position, in the OTC channel to increase the promotion of pharmacy terminals to achieve sales growth. The traditional Chinese medicine slice plate expands the layout through the successive acquisition of many places prepared slice enterprises, the upstream layout of GACP traditional Chinese medicine base, the obvious production capacity advantage of the production side, the sales side vigorously develop medical institutions to achieve incremental growth, and the export business to achieve a major breakthrough in 2021. The comprehensive service of the National Medical Center, the comprehensive business of traditional Chinese medicine and the business layout of traditional Chinese medicine health products are advancing rapidly, and the income is expected to grow rapidly.

Risk tips: filing to promote the risk of affecting the progress of sales; traditional Chinese medicine formula granule industry competition aggravates the risk.