Event: Recently, we had an exchange with Haiwang Biotech's business and the Shenzhen GPO model. Under the two-ticket system and increased business reform, Sunshine's centralized distribution business has clearly benefited. Since 2016, a series of medical reform policies have been strongly introduced. In particular, under the full implementation of the two-vote system and business reform, a large number of small commercial companies and ticket companies are facing an existential crisis, and industry concentration will increase greatly in the future. In terms of pharmaceutical logistics, the company's centralized distribution model, which began in Zaozhuang, Shandong in 2007, was the earliest implementation of the two-ticket system. The model achieved a win-win situation for all parties by compressing distribution links and sunshine rebates, and has strong replicability. Currently, it has expanded to 16 prefecture-level cities, and revenue has increased from 1.5 billion in 2007 to 15 billion this year, an increase of 10 times over ten years. We believe that the company's centralized distribution in Sunshine will continue to benefit from the implementation of policies such as the two-ticket system. The Shenzhen GPO model was officially implemented in July, and the company is the best target for the corporate version of “Sanming Medical Reform”. On May 6, Shenzhen issued the “Implementation Plan for the Reform of the Drug Supply Guarantee System for Shenzhen Public Hospitals (Draft for Comments)”, which plans to develop a centralized drug procurement model that adheres to government guidance and market dominance. The goal is to reduce the overall cost of drug supply in public hospitals by more than 30% and the share of drugs to less than 25%. We believe that the Shenzhen GPO model is an enterprise-led version of the “Sanming Model,” and that the company-led Quanyangyang.com GPO platform is expected to participate deeply, and the company is the target for the best benefits. From a model point of view, the Shenzhen GPO model and the Sanming model have the following advantages: 1) Supervision and implementation are separated; public hospitals are the purchasers; only entrustment requirements are raised; the Municipal Health Planning Commission is the policymaker; enterprises are the implementers; and the municipal medical management center is the supervisory authority. Compared with the Sanming model, which is wholly dominated by the government, it is more market-based and transparent. 2) The price reduction was strong. Under the Sanming model, the price of domestic drugs was reduced by 15-30%, and the price of imported drugs was reduced by 3-5%, while the overall price reduction in the Shenzhen model was 30%, which is unprecedented. On May 17, Shenzhen announced the “Opinions on the Institutional Adjustment Plan for Medical Service Prices in Shenzhen Public Hospitals (Draft for Comments)”, that is, while the low-price supply of drugs cuts out doctors' rebates and the gray interest chain in the circulation chain, and in line with the reform of the medical service revenue distribution system in the reformed region, we believe that the probability of success of the three-medicine linkage system in Shenzhen is extremely high. At the same time, considering that compared with Sanming, Shenzhen itself is not pressured to pay medical insurance and the scale of drugs is close to 10 billion dollars. If this model is successfully implemented in Shenzhen, then it is expected that in the future, the model will be promoted in several prefectures and cities. It is likely that this model will be the first to be adopted, and companies will be the best beneficiaries of this model. Valuation and ratings: We expect the company's diluted EPS in 2016-2018 to be 0.32 yuan, 0.48 yuan, and 0.68 yuan respectively, corresponding to the current PE of 61 times, 40 times, and 29 times, respectively. Considering the rapid growth rate of the company's performance, the novel business model, and the increase in majority shareholders' holdings, showing confidence, it was given an “increase in holdings” rating for the first time. Risk warning: Shenzhen model promotion falls short of expectations, cumulative risk of accounts receivable, and risk of extended expansion falling short of expectations.