Incident: The company announced that it plans to raise no more than 1.02 billion yuan in non-public shares to relocate and expand the new plant, acquire and increase capital to obtain 20% of Changzhou Watson's shares, subscribe for 4.76% of Watson 3D's shares, and supplement working capital. Among them, the majority shareholders subscribed for 110 million shares (980 million yuan), and the employee shareholding plan subscribed for 5 million shares (42.5 million yuan). The future of China's orthopedic materials market has broad scope and opportunities for localization. The orthopedic materials market accounts for 37.5% of the global biomaterials market, making it the department with the greatest demand for biomaterials. It is estimated that in 2015, the global orthopedic market was about 47 billion US dollars, and the size of orthopedics in China was 16.6 billion yuan, about 1/10 of the size of the US orthopedic market. The future space is broad. Driven by aging, the growth rate is about 18%, far exceeding the global level of 3%. Joint, trauma, and spine products are the three main categories of orthopedic medical devices in China. Apart from trauma, which is the only type of product not dominated by foreign manufacturers, the joint and spine markets are mainly dominated by overseas companies such as Johnson & Johnson, and there is huge room for localization. Changzhou Huasen's products are of excellent quality and will form a collaboration with the company's products. Changzhou Watson was founded in 2002. Its products mainly include trauma and spinal products. In 2015, it achieved operating revenue of 160 million yuan and net profit of 47.44 million yuan. The quality of its products is excellent. The stapler has obtained US FDA 510 (K) certification. Mid-core drill internal nails, digital customization, foot and ankle products, pelvic steel plates, etc. are all exclusive products in China. Its products are not only exported to developing countries such as South America and the Middle East, but have also begun entering traditional developed European and American countries such as the United States and France. We believe that Changzhou Watson's business forms a collaboration with the company's orthopedic products. This capital increase will help extend the company's product line and strengthen the company's advantages in the orthopedic field. Watson 3D specializes in 3D printing to provide solutions for personalized medical treatment. With the diversification and complexity of orthopedic diseases, individualized treatment for patients is essential. As an innovative technology, 3D printing solutions are receiving more and more attention and popularity in the field of orthopedics. If calculated according to 10% of the orthopedic equipment market, China's overall potential market in 2015 was about 1.66 billion yuan. Watson 3D mainly sells 3D printer hardware, and provides orthopedic digital customized solutions for doctors and patients, making it easy to generate physical objects that doctors and patients can intuitively see, assist doctors in pre-operative planning and communication between patients, improve the success rate of surgery, shorten operation time, reduce patient pain, and improve doctor efficiency. Performance forecast and valuation: We predict that the company's diluted EPS in 2015-2017 will be 0.06 yuan, 0.14 yuan, and 0.21 yuan, respectively, and the corresponding PE will be 172 times, 72 times, and 50 times, respectively. It is expected that Jintiange capsules will maintain a high growth rate of around 20%, and the market has high expectations that artificial tiger bone wine will be approved. Intervening in the orthopedic materials market through fixed increases and entering 3D printing will further increase the company's valuation, and expectations for subsequent epitaxial expansion are strong. Upgraded to “Buy” rating. Risk warning: Non-public offerings are progressing less than expected; new products are being approved faster than expected.