The 2016 results were in line with expectations, and Yibai Pharmaceutical announced 2016 results: operating income of 3.687 billion yuan, up 11.64% year on year; net profit attributable to parent company was 385 million yuan, up 103.22% year on year, corresponding to earnings of 0.49 yuan per share. At the same time, the company announced results for the first quarter of 2017, with revenue of 931 million yuan, an increase of 26.37%, and net profit of 101 million yuan, an increase of 22.27%. The results are in line with expectations. Development trend The pharmaceutical industry is growing steadily, and anti-tumor drugs are growing by more than 10%. In 2016, the pharmaceutical industry's revenue was $3.188 billion, an increase of 4.47%, of which prescription drug revenue was $2,883 million, an increase of 4.55%; OTC product revenue was $294 million, an increase of 3.23%. By product line, revenue from anti-tumor drugs was 1.88 billion dollars, an increase of 10.68%. On the one hand, it benefited from the company's vigorous development in the field of oncology medical services, forming a good synergy effect. Among them, in terms of sales, Eddy's injection increased 13.05%, injectable loplatin increased 52.90%, compound tabby capsules increased 19.41%; cardiovascular drug revenue increased 516 million, an increase of 3.69%. Among them, sales of Ginkgo biloba injections increased by 21.65%, and sales of intracardiac capsules increased by 22.82%; gynecological drug revenue increased by 22.82%; gynecological drug revenue increased by 22.81 million %. Among them, sales of anti-inflammatory capsules increased by 113.38%, and sales of Baogong hemostatic granules fell 3.72%. The rapid growth of medical services has become a new growth point. In 2016, medical service revenue was 496 million yuan, an increase of 98.03%, becoming a new growth point. The company continues to expand its layout in the field of oncology medical services. It has 3 hospitals including Guannan Hospital, Chaoyang Hospital, and Bijie Hospital (with 1,380 beds), 27 cancer treatment center projects, and 6 oncologist groups (Guizhou, Anhui, Hunan, Liaoning Oncologist Group, Tianjin Aikang Medical, and Sichuan Hanboride). It is expected that it will continue to expand and maintain rapid growth in the future. The sales expense ratio has declined markedly. In 2016, the company's overall gross profit margin was 76.46%, down 4.39ppt from the previous year. Mainly, the gross margin of medical services was low, which had a certain drag on overall profitability; the sales expenses ratio was 49.82%, down 12.09ppt from the previous year. Mainly, the company increased marketing in 15 years, and sales expenses increased significantly, but there was a recovery in 2016. The profit forecast maintains the “recommended” rating. Considering that the company's traditional business is expected to accelerate growth driven by a new round of health insurance, we raised our earnings per share forecast for 2017 by 11% from RMB 0.55 to RMB 0.61. The earnings per share forecast for 2018 was raised by 20.9% from RMB0.61 to RMB0.74. Valuation and recommendations Currently, the company's stock price corresponding to the 2017/2018 P/E is 27X/22X. We maintain our recommended rating and target price of RMB 20.00, which is 21.88% higher than the current stock price. The target price corresponding to 2017/2018 P/E is 33X/27X. Risky traditional Chinese medicine business tenders and prices were reduced; progress in oncology business development fell short of expectations.