Event: on June 16, Tailong Pharmaceutical issued a notice on signing the Strategic Cooperation Framework Agreement with the Chinese Research Hospital Society. The company and the China Research Hospital Society (hereinafter referred to as the "Society") intend to adopt strategic cooperation, in line with the principle of resource sharing, mutual benefit and win-win, common development, give full play to their respective advantages and jointly carry out diversified and multi-level cooperation.

Equality and mutual benefit, complementary advantages, Tai long Pharmaceutical mainly gives play to the advantages of capital and industrial experience, and the Society mainly provides experts and platform scientific research resources, which will promote the strategic development and implementation of the company in the fields of traditional Chinese medicine, CXO, Greater Health and so on. The contents of the cooperation between the two sides are (Party A: Henan Tailong Pharmaceutical Co., Ltd., Party B: China Research Hospital Association): 1) Party B guides Party A to carry out the application of major national and local special fund projects, to provide support for the research, transformation and application of medical science and technology. 2) Party B makes use of its rich expert resources to play the role of bridge and link to build an intelligent platform for the integration of politics, industry, research and application for Party A to guide Party A to better carry out clinical research, and to plan and technical guidance for the secondary development of Party A's existing traditional Chinese medicine products and other related research work. 3) relying on the new leading CXO integrated technical service platform of Party A's subsidiary, and Party A's rich experience in traditional Chinese medicine research and development, production and drug registration, Party B will participate in the exchange and cooperation related to the creation of integrated traditional Chinese and western medicine with Party B; 4) as Party B's long-term strategic partner, Party A can provide Party B with funds and related resources for project research and development, and enjoy priority cooperation rights. 5) as a long-term strategic partner of Party B, the R & D achievements of the projects funded by Party An or the patent application rights or related intellectual property rights jointly formed during the cooperation period shall be owned by Party A. The two sides also agreed that the first cooperation project would be a preclinical and clinical trial study of Party A's Shuanghuanglian oral liquid for anti-novel coronavirus indications, although there is still great uncertainty in the prospect of follow-up commercialization. the intensity of cooperation between the two sides can still be seen from the core products, hot directions and practical applications. The two sides will sign a separate cooperation agreement on specific cooperation issues, and the research on other follow-up projects will be accelerated.

We have a solid foundation for cooperation, an open attitude and a vision for the future. This framework agreement is valid for 5 years and its expiration can be extended. It is intended to establish a long-term cooperative relationship of sustainable development and will not have a significant impact on the performance of the current year. After the completion of the switch, the management will gradually start the optimization, and look forward to the finalization and landing of subsequent specific cooperation projects. at the same time, the advantages of high-tech resources integration and corporate governance in Zhengzhou, a powerful shareholder, are expected to be further released in the future, injecting vitality into the company's development. create leading companies and regional business cards.

Investment advice: the company as a whole benefits from the revival of traditional Chinese medicine, core business stability, "Shuanghuanglian"

Series of products have a deep moat, and the products form a platform combination, benefiting from the trend of differentiation, differentiation and upgrading. The business of traditional Chinese medicine slices and drug R & D relies on professional subsidiaries for a long time to establish a benchmarking image in the industry and benefit from the long-term development of the medical industry. The company actively seeks change, and the background strength of the new controller is strong, which will be further blessed and promoted in resource matching, management mode and development ideas, so as to promote long-term, healthy and sustainable development. We are optimistic about the new vitality and new appearance brought about by the equity change, and the long-term development space of the company in the future. it is estimated that the EPS in 2022-2024 will be 0.07,0.17,0.25,85.4x, 35.6x and 25.3x, respectively, and maintain the "overweight" rating.

Risk hints: large fluctuations in raw material prices, lower-than-expected downstream demand, changes in epidemic situation and other vaccines, R & D and promotion process of specific drugs, changes in drug R & D demand, R & D progress less than expected, and the company's net profit has declined in the past two years.