Events: The company released its 2016 annual report. In 2016, it achieved revenue of 3.1 billion yuan, +38.3%; net profit of 65.37 million yuan, +3.2%; net profit after deduction of 49.01 million yuan, -8.2%; net operating cash flow of 62.16 million yuan, -8.4%; and EPS of 0.26 yuan. At the same time, the company announced the second phase of the employee stock ownership plan (draft), covering no more than 80 senior management and core employees of the company, with 50 million self-financing and no more than 50 million loans. The priority ratio is 1:1, and the total scale is no more than 200 million yuan. Performance was slightly lower than expected, and second-tier products performed well. The company achieved revenue of 3.1 billion yuan in 2016, +38.3% year-on-year, and profit of 65.37 million yuan, +3.2% year-on-year. The main reason why the revenue growth rate is faster than the profit growth rate is that the Zhuhai Xiangle merger. After deducting merger factors, the company's revenue was 240 million yuan, +7.2% year-on-year, and net profit was 44.32 million yuan, -30.1% year-on-year. The sharp decline in profit is mainly due to the increase in expenses: 1) financial expenses increased by 9.93 million yuan over the same period last year; 2) losses of associated companies, an increase of 5.88 million yuan over the previous year; 3) new product promotion expenses increased, and sales expenses increased by 1.94 million yuan over the same period last year. Looking at product lines, the company's leading variety of meningeal construction achieved revenue of 173 million in 2016, -3.5% year-on-year, but second-tier varieties of pleura and type B dura were 65.0% and 56.6%, respectively. Considering the strength of artificial corneas and the elimination of some factors that hamper performance, the parent company's performance is expected to improve significantly in 2017. Regenerative medicine is the future development direction of the pharmaceutical industry, and the world's only artificial cornea with blindness elimination is expected to increase rapidly. The greatest advantage of regenerative medicine and traditional treatment methods lies in the cure rather than the current limited relief of diseases. Therefore, it has great social and economic significance in the field of treatment of chronic diseases and is the future development direction of the pharmaceutical industry. In April 2016, the company's artificial cornea, which can remove blindness and restore blindness, was approved for listing. It is the only artificial cornea in the world that uses blindness elimination as a standard. Currently, the number of corneal blindness patients nationwide has reached 4 to 5 million, adding about 100,000 people every year. Conservatively, the stock market is 40 billion, and the market space is increased by 1 billion yuan per year. Considering the uniqueness of the new product and the differences from the company's original sales channels, the company strategically acquired Zhuhai Xiangle. The main business of Zhuhai Xile is the import and sale of intraocular lenses. It has 143 dealers and covers more than 1,400 hospitals. We believe that Zhuhai Xile is expected to help prosthetic corneas increase rapidly. A domestic biorenewable materials platform company. The new product+strong channel model helps the company increase the volume of its products quickly. The company is a biorenewable materials platform company with strong scarcity. The company has now formed a strong product echelon through continuous superposition of exclusive high-barrier new products. The company's Youdeqing Cornea is the only artificial cornea in the world that uses decontamination and rehabilitation as a treatment standard. The advantages are obvious. The domestic cornea market has reached 10 billion yuan. The acquisition of Zhuhai Xiangle continues to extend the cornea industry chain. The product volume is expected to increase rapidly, and performance is expected to explode. We believe that Youdeqing+Zhuhai Xiangle, and Whitdison, which is applying for production approval for the new drug Phenylenmode+ to be acquired, are a model for the company's new product+strong channel combination. In the future, the company is expected to continue to expand and strengthen new products through this model. Profit forecasts and investment advice. Considering the impact of cost drags, we lowered our profit forecast slightly. The estimated net profit for 2017-2019 is 125 million yuan, 150 million yuan, and 180 million yuan respectively; if Whiddison's table is considered, the 2017 exam preparation performance is 285 million yuan, and the market value PE after the corresponding increase is 37 times. Considering the scarcity of the company's biorenewable materials platform, we are optimistic about the company's long-term development space, so maintain a “buy” rating. Risk warning: R&D progress and superior marketing did not meet expectations, extended progress or fell short of expectations, and the performance of mergers and acquisitions companies fell short of promises.