Event: 2015.10.15, the company released the 2015 three-quarter report forecast. Net profit attributable to shareholders of listed companies for the first three quarters was 248.275.7 million yuan, down 0-10% from the previous year. Comment: The results for the first three quarters fell slightly short of our expectations. In an environment of severe bidding and fee control, traditional Chinese medicine injection companies are facing unprecedented pressure on their performance. Shanghai Kaibao, which mainly focuses on high-base products: 1) Growth based on a high base is becoming more difficult: the company's performance is slightly below expectations; 2) Achieving full-year performance targets is expected to depend on diversified marketing adjustment+merger and acquisition expansion: Xinyi's acquisition+establishment of an industrial investment fund shows a signal of the company's active expansion and expansion. We expect that the company will continue to rapidly enrich its product line and enhance profitability through flexible industrial investment methods such as shareholding and mergers and acquisitions. Maintain the “Overweight” rating. Under the pressure of tenders, sales of phlegm and fever-clearing injections increased slightly, which was basically the same as last year. 1) Basic drug tenders promote sales volume: Under severe bidding pressure from Anhui, Hunan, Zhejiang and other places, sales in the first half of the year were basically the same as last year. We think this is a systemic risk faced by the whole range of traditional Chinese medicine injections. In particular, large varieties such as Phlegm Heqing, Hot Doxin, and Ginseng Fuzheng, etc., are under pressure from medical insurance fees, are under greater pressure on performance. We believe that Guangdong, Xinjiang, Guangxi, Liaoning, Jilin, Shandong, Henan, Anhui, Zhejiang and other places where phlegm heqing has already entered the basic drug supplement catalogue will accelerate release to make up for the pressure on its price. On the other hand, with the diversification and adjustment of the company's sales model, the basic drug market will gradually improve its performance. 2) There is still no risk of getting rid of a single product in the short term: Currently, phlegm heqing injections account for 91% of the company's overall revenue. Despite the rapid expansion of the base drug market, there are still policy risks such as price cuts (such as Zhejiang Province, which has already been implemented). If no new varieties are introduced in a short period of time, there is still a risk that the company's performance growth rate will slow down. We believe that 2014 was a year for the company to lay the foundation for the company. The third phase of production, product series development and harvest, and continued implementation of mergers and acquisitions have laid a solid foundation for future growth. However, according to a detailed analysis of the company's short-term performance, most of the varieties acquired by the company are in the clinical research stage. Although there are Class 1.1 new drugs (anti-depressive) such as Youxindin, there is still uncertainty about future post-marketing promotion. We believe that in 2015, the pharmaceutical sector underwent frequent mergers and acquisitions under policy pressure, which is expected to further accelerate the process of mergers and acquisitions, creating a product line that supports the company's long-term steady growth. Follow-up focus: Sales diversification reform+M&A expansion. Although on the basis of academic promotion of phlegm fever-clearing injections, the company has developed varieties such as phlegm fever-clearing capsules, oral liquid, and 5ml injections (the capsules were put into production at the end of 2014.4, and the self-employed plus investment model is being promoted, with daily usage costs exceeding 100 yuan), we believe that the promotion of new products will inevitably experience a gradual pace of release, and it will not be possible to make up for the performance pressure brought about by the slowdown in the growth rate of phlegm fevers in a short period of time. We expect that the company's business will maintain a steady growth trend with the diversification of the company's sales model, development of the basic drug market, and mergers and acquisitions. Profit forecast: Considering the pressure of the policy environment for the next 2-3 years, the company's profit forecast was slightly lowered. The company's 2015-2017 revenue is expected to be 16.58, 19.39, and 2,227 billion yuan, respectively, with growth rates of 11.96%, 16.97%, and 14.85% respectively, and net profit attributable to the parent company of 3.74, 3.99 and 447 million yuan respectively, with year-on-year growth rates of 7.11%, 6.54% and 12.23%, corresponding to the 2015-17 diluted EPS of 0.45, 0.48, and 0.54 yuan. Considering the substantial progress of the company's merger and acquisition process, a certain valuation premium was given for 2016, 35-40PE (average of 30 PE for comparable companies in the industry). The target price range is 16.8-19.2 yuan. Currently, the company's stock price corresponds to 27PE in 2016, giving it an “increase in holdings” rating. Since the second half of 2014, we have suggested that if the company relies on a single type of phlegm clearing injection, it is very difficult to achieve a breakthrough in market value from 10 billion to 20 billion in the short term. Even during the bull market craze, in 2015.5 we still gave a rational interpretation of whether the company can surpass 20 billion dollars in market capitalization by relying on this single type. Now, with the systemic impact of tenders, that leap forward is even more difficult. Currently, the new product release progress is slightly lower than expected. We will continue to monitor the progress of the company's mergers and acquisitions and the new product launch process and development progress. Risk warning: New product promotion falls short of expectations, risk of price reduction of traditional Chinese medicines, new product pricing affects promotion