Company News On March 31, the company released its 2015 annual report. Case review All businesses maintained steady growth. In 2015, the company achieved operating income of 1,474 billion yuan, an increase of 35.74% over the previous year, net profit of 101 million yuan, a year-on-year decrease of 33.86%, after deducting non-net profit of 64.861 million yuan, an increase of 2.63% over the previous year. The main reason for the year-on-year decline in the company's net profit was a decrease in investment income. By business, reagent revenue was 534 million yuan, up 15.05% year on year, instrument revenue was 373 million yuan, up 43.08% year on year, and service revenue was 485 million yuan, up 39.34% year on year. All businesses maintained relatively steady growth. The company's expense ratio for the period was 30.89%, down 1.75 percentage points from the previous year, and the cost ratio for the period was well controlled. The consolidated gross profit margin was 37.63%, down 4.25 percentage points year over year. The independent medical laboratory business is growing rapidly. The company currently has 8 in vitro diagnostic laboratories in Guangzhou, Chengdu, Shanghai, Hefei, Nanchang, Kunming, Taizhou, and Jinan. With the continuous advancement of medical and health reform, the drive of national policies, and the continuous change in the concept of medical and health care institutions, the development environment for independent medical laboratories has been continuously improved. The operation of the company's independent medical laboratories developed rapidly in 2015, and the operating conditions and profitability of each laboratory were continuously improved, and a trend of reasonable layout and optimization of operation has now formed. In the future, the company's independent laboratory will consider cooperating with hospitals to build joint laboratories. Optimistic about the company's second-generation genetic sequencing prospects The company has a comprehensive layout from instruments and reagents to services in second-generation genetic sequencing. In November 2014, the company obtained medical device registration certificates for fetal aneuploidy 21, trisomy 18, and trisomy 13 test kits (semiconductor sequencing method) and genetic sequencer products, becoming the second manufacturer after Huada to have a second-generation sequencing instrument and reagent registration certificate. Guangzhou Da'an Clinical Examination Center was the first to obtain pilot qualifications for prenatal screening and diagnosis, cancer diagnosis and treatment programs in 2015. The company has taken the lead in second-generation sequencing products and services, and we are optimistic about the company's future development in this area. Experimenting in the field of hospital investment In April 2014, the company and Guangzhou Zhongda Holdings jointly invested in the establishment of a joint venture, Sun Yat-sen University Hospital Investment Management Company, to participate in the restructuring and expansion of hospitals affiliated to CUHK, and began to lay out the hospital investment business. In August 2015, the company's subsidiary Changdu Da'an Hospital Investment Management Company signed a “Cooperation Framework Agreement” with the Bazhong Enyang District Government. The two parties jointly funded the establishment of a project management company to invest in the construction of the People's Hospital project in Enyang District of Bazhong City. In December 2015, the company issued an announcement to sign a hospital project contract with the Kaili Municipal People's Government in Guizhou Province to establish a project management company to build a grade 3 A general hospital project in Kaili City. Hospital investment is the company's new experiment in the field of medical services. Sun Yat-sen University's subordinates have rich medical service resources and management experience. Relying on these advantages, the company is expected to win good development prospects in hospital investment management. Risk Warning Company risks include, but are not limited to, the following: policy risk, industry competition risk, technology risk. The investment proposal is to give a “cautious increase in wealth” ratings over the next six months, and is expected to achieve EPS of 0.18 and 0.24 yuan in 16 and 17. Based on the closing price of 29.61 yuan on March 31, dynamic PE is 165.57 times and 124.22 times, respectively. The average projected price-earnings ratio of listed companies in the same industry in '16 and '17 was 56.11 times and 41.71 times. The company's current valuation is higher than the industry average. As a leading enterprise in the domestic molecular diagnosis industry, the company is backed by Sun Yat-sen University, has strong R&D capabilities, and has a rich product line. The business scope covers many fields such as clinical application, public health, inspection and quarantine, scientific research, government projects, enterprise applications, etc. The second-generation sequencing business has broad prospects for development, and has new perspectives in the field of medical service investment. We are optimistic about the company's development in the coming period and give it a “cautious increase in wealth” rating.