Core view: 1. Traditional business is growing steadily and has become a stable source of profit. Currently, the company's main business is infant incubators, infant radiation warmers, and jaundice treatment series. It is a leading enterprise in the infant care industry, accounting for more than 40% of the market share. The baby-care industry still has potential for expansion in the future. The five-year compound growth rate of product demand is expected to be above 15%. At the same time, the trend of import substitution also brings more room for growth to high-quality domestic manufacturers such as David. The company's baby care equipment business has a high gross margin, which can contribute to stable profits and cash flow. 2. Entering the stapler market with huge space is expected to create another David. The subsidiary Vilkedi Stapler obtained a medical device registration certificate and officially entered the stapler market. The stapler market is currently 3 billion, and the future will usher in five years of rapid development with the expansion of clinical applications and the increase in grassroots usage. Currently, the domestic stapler market is dominated by foreign investment and is in the initial stage of import substitution. The company is positioned at the middle end, and can take advantage of the trend of import substitution, and use capital and existing marketing networks to expand rapidly. Stapler's market size is expected to reach 6 to 8 billion dollars in the next three years. Assuming that the company occupies 5% of the share within five years and has a turnover of 300 million, it can create another David. 3. The maternity industry has broad prospects for integration, and there is huge scope for vertical mergers and acquisitions. The overall scale of the maternity industry exceeds 200 billion dollars, and there are currently no leading enterprises. The baby care equipment industry is a segment of the maternity industry in the broad sense of the term. We believe that David Healthcare, as a leader in the infant care industry, has accumulated many high-quality industry resources through years of deep cultivation, and has the conditions and capital to enter the maternity industry, which has a larger field and broader prospects. The company currently has plenty of cash on its accounts, and expectations for mergers and acquisitions are strong. If there is a breakthrough in upstream and downstream integration in the maternity industry, it is expected to occupy a place in the 100 billion market in the future, with broad prospects. 4. Profit forecast and investment recommendations: The 2015-2017 EPS is expected to be 0.20, 0.24, and 0.30 yuan respectively. Based on the closing price on June 17, the corresponding PE is 269, 225, and 178, respectively. The company's original baby care equipment business is growing steadily, and the subsidiary's entry into the stapler market is expected to create another David. The potential market space for the maternity industry is immeasurable. Driven by three aspects, there is broad scope for improving the company's valuation. We are optimistic about the company's future development, covered for the first time, and gave it a “recommended” rating.