Summary of the report:

Divest loss-making assets and real estate business and focus on pharmaceutical health. In recent years, the company has spun off Zhongguancun Construction, Zhongke Xiaoyun and other assets, focusing its business on the field of pharmaceutical health, and by means of endogenous extension, focusing on in vitro diagnosis, high-end specialized hospitals and light asset health pension professional operation and management, as well as looking for investment opportunities in prescription drugs and OTC products with greater market opportunities.

Many mergers and acquisitions to build a pharmaceutical platform. The company has acquired Huasu Pharmaceutical, Shandong Huasu, Duoduo Pharmaceutical and other companies, covering cardiovascular, neurological, gynecological and respiratory drugs and other product categories. At the same time, there are rich varieties under research, including drugs for the treatment of Alzheimer's disease, cyanide detoxification drugs, nerve analgesics and so on. After the company has spun off its loss-making business, the performance of the pharmaceutical sector is expected to be highlighted.

Drug consistency evaluation and daily chemical products business are expected to become bright spots in the future. Suyazi Company, established in cooperation with the Academy of military Sciences, is one of the few units in China with the ability of general drug consistency evaluation. With the strong scientific research capability of the Academy of military Sciences, the company is expected to become a leading enterprise in this emerging industry, and the market prospect space is expected to reach 40 billion. The company's Huasu Yuchuang toothpaste has been laid one after another through physical and online channels, and through all-round marketing such as advertising sponsorship, the existing order is more than 100 million yuan, and it is expected to quickly increase its volume in the next few years and become the company's star product.

Cover for the first time and give a "recommended" rating. We estimate that the EPS of the company from 2016 to 2018 will be 0.03 PE 0.160.26 yuan, corresponding to 53 times of that in 2017. In recent years, the company has made clear the transformation direction of Pharmaceutical Health, and the pharmaceutical business will gradually become the main contribution to the company's performance. Suya's drug consistency evaluation business and daily chemical products such as toothpaste are likely to be new bright spots for the company's growth in the next few years. Considering that major changes are taking place in the company's fundamentals, as well as the imminent increase of the company, and there is a short-term game opportunity for the stock price upside down, we cover the company for the first time to give a recommended rating, with a target price of 11 yuan.