Summary:

If "healthy China" can be smoothly written into China's 13th five-year Plan as we expected, it will formally become a development strategy, and its implementation will be comparable to the "beautiful China" strategy. It will become a programmatic, planned and targeted national policy. Starting from its purpose, "to realize the nationalization of the medical treatment security system, so that the whole people can enjoy modern medical services", the procurement tide of large-scale and large-scale upgrading of basic medical equipment is about to appear. The large-scale purchase of basic medical devices will open up the demand market for those manufacturers who produce basic medical equipment. For example, the manufacturers of basic medical devices such as sphygmomanometer and blood glucose meter are also expected to reverse the company's performance in this purchasing tide.

In addition, with the increasing popularity of the Internet and intelligent instruments in the world, especially in China, smart medicine and large health data platform will become the development trend of medical devices in the future. Jiu'an Medical has keenly captured this trend before 2010, first setting up a "iHealth" subsidiary in the United States, and designing smart medical related applications for Apple Inc, and its sales in the United States are also on the rise. Jiu'an Medical is not satisfied with the status quo, it set up a new subsidiary in Hong Kong in 2014, and formally introduced XIAOMI Technology to become the company's strategic investor, making use of XIAOMI's channel advantage to successfully open the Chinese market. The "iHealth" business will also grow rapidly from less than 30 per cent of revenue to more than 50 per cent. Although the company's performance in the past two years is not satisfactory, it is mainly due to the fact that the iHealth business is still in the investment stage, and a large amount of hardware and software investment has seriously dragged down the company's performance as the "iHealth" business is gradually on the right track, the company's expenses and costs will drop significantly, and a reversal of performance is just around the corner.

To sum up, the "iHealth" business will become the main driving force for the development of Jiu'an Medical in the future. We forecast that the EPS of the company from 2015 to 2017 will be-0.01,0.04,0.0 yuan respectively, corresponding to the PE of-3117 times, 790 times and 362times, respectively.

Risk Tips:

1) the implementation effect of "healthy China" policy is lower than the expected risk.

2) the risk of the company's "iHealth" business development is lower than expected

3) the company is exposed to the risk of strong competition in the field of ODM/OEM.