Incident: On the 16th, the company announced that after friendly negotiations between the three parties, Anhui Zhonggong Network Medical Information Technology Co., Ltd., a subsidiary of the company, cooperated with the Chuzhou Social Insurance Management Center and the Chuzhou Human Resources and Social Security Information Center on the “Basic Medical Insurance Payment Evaluation and Standard Setting Commissioned Service”, and signed the “Basic Medical Insurance Payment Evaluation and Standard Formulation Commissioned Service Agreement” on February 15, 2017. Up to now, the company has signed entrustment service agreements for basic medical insurance payment evaluation and standard formulation with nearly 30 cities, including Hangzhou, Yueyang, Nanjing, Zhuhai, and Chifeng. The intelligent management business of health insurance funds has expanded rapidly and has entered 30 cities. Following the successful signing of service agreements between the company and Chuzhou in Anhui, up to now, the company has signed entrustment service agreements for basic medical insurance payment evaluation and standard-setting with nearly 30 cities, including Hangzhou, Yueyang, Nanjing, Zhuhai, and Chifeng. Payment evaluation and standard setting is the core business of the intelligent management business of health insurance funds. It is also an accurate demonstration of the pharmaceutical industry's database application, big data analysis, and business extension capabilities. The company has covered the health insurance fee control PBM business in nearly 200 prefectures and cities in 24 provinces/municipalities across the country. It has served more than 800 million insured people, and the total number of documents examined has exceeded 16 billion. Long-term personal service for health insurance fund PBM business, deepening business from top to bottom, accumulating huge amounts of pharmaceutical big data, laying a solid foundation for the company to successfully carry out intelligent health insurance fund management business. We believe that the 200 prefectures and cities that have not yet signed up for intelligent health insurance management services will sign contracts one after another in the future, and that the company's PBM business will gradually be upgraded from the PBM1.0 version, which was initially a simple fee control review, to the PBM 2.0 version of the intelligent management of health insurance funds. The profit model is gradually being clarified and implemented, and the direction of service charges is diversified. According to the announcement, the company will continue to seek to collect service fees from health insurance according to the service content. At the same time, it will also carry out innovative cooperation with pharmaceutical manufacturers to charge certain information service fees and value-added service fees from pharmaceutical manufacturers. It will initially be implemented in 30 cities that have signed entrustment service agreements for basic medical insurance payment evaluation and standard setting. We believe that it will be too late for the full implementation of the charging model for government health insurance funds, but there is great uncertainty about the exact timing, the implementation of charges to pharmaceutical companies is highly feasible, and diversification of charging directions accelerates the performance of the company's performance. Haihong Holdings has served health insurance funds for a long time, solidified service relationships, and established a broad moat. “Giving always pays off”! The investment proposal announced on December 29, 2016, that the company has received equity transfers totaling approximately $152 million (HK$22 million +RMB 13.256 million) and is expected to achieve a total profit of $90 million, which will be included in 2016 profit and loss. We expect that in 16/17/18, the company's net profit will be -0.4, 1.42, and 554 million yuan, and EPS will be -0.02, 0.16, and 0.58 yuan (considering additional issuance). Maintain the target price of 83 yuan and maintain the “buy” rating. Risk warning 1) The progress of PBM business development and fees is lower than expected; 2) the additional issuance plan has been accepted by the Securities Regulatory Commission, but there is still uncertainty about whether it can be approved; 3) major changes in health care policy; 4) macroeconomic risk and market fluctuation risk.