Events:

In the first half of 2015, the company achieved operating income of 224 million yuan, down 8.6% from the same period last year; the net profit belonging to shareholders of listed companies was 22 million yuan, down 22.3% from the same period last year; and the net profit after deduction for shareholders of listed companies was 23 million yuan, down 13.4% from 0.15 yuan last year, slightly lower than market expectations.

Viewpoint:

Short-term policy disturbance affects the company's revenue. The company's main products are large infusion (including non-PVC soft bags and plastic bottles) and medical injection puncture equipment (including safety syringes, aseptic syringes and precision infusion devices). Among them, large infusion products account for 80% and 85% of the company's operating revenue and profit respectively. In the first half of this year, the sales revenue of large infusion products decreased by 12.8% compared with the same period last year, and the gross profit margin decreased by 2.9%. This is the main reason for the decline in revenue and profits compared with the same period last year. Zhejiang, Jiangsu and Guangdong are the core sales areas of the company's infusion products. Since the beginning of this year, the lower-than-expected progress of pharmaceutical bidding in various provinces has affected the company's product sales. Zhejiang Province began a new round of centralized drug procurement cycle in April 2015, resulting in a decline in sales and revenue. In the past two years, the continuous change of bidding policy and the decline of bidding price have led to a reduction in product prices. Guangdong Province has comprehensively implemented monthly volume procurement of base drugs and non-base drugs, which has affected the winning price of the company's products and the decline of gross profit margin. This is one of the reasons why the decline in profits is greater than the decline in income. The increase in the rate of corporate expenses is also the reason for the sharp decline in profits. The intermediary fees resulting from the listing of the company in February this year led to an increase of 1.7% in the rate of management expenses in the first half compared with the same period last year; the company's sales expenses were basically the same as last year. Due to the decline in revenue, the rate of sales expenses increased by 2.1% over the same period last year. It is expected that as local tenders are completed one after another and enter the actual procurement stage, the sales of the company's large infusion products will be significantly higher than in the first half of this year, which will lead to performance growth.

The layout of large infusion products is medium-and high-end, and is optimistic about long-term development. Compared with the existing first-generation glass infusion bottles and second-generation plastic infusion bottles, the company's non-PVC soft bag infusion products have obvious performance advantages and is the development trend of the industry. in the future, with the improvement of medical level and the change of medication habits, non-PVC soft bags will upgrade and replace glass bottles with about 2 times the market space, which is optimistic about the company's long-term development in this field. The company continues to strengthen the research and development of large infusion related products, and continues to make efforts in the upgrading of large infusion packaging materials, peritoneal dialysate, hemodialysis concentrate and new varieties of injection puncture equipment, etc. it is expected that with the gradual development of echelon products, it will provide a new driving force for the development of the company.

Safety syringe products have great potential for growth. The subsidiary Jumin Biological American RTI Co., Ltd. has been cooperating in the production of safety syringes for 13 years, and the contract of the project has been renewed until 2114. The product is registered and sold by RTI in the United States and has been sold in many countries around the world. In the first half of this year, the number of orders for safety syringe projects increased by 45 percent over the same period last year, and export revenue reached nearly 30 million yuan, an increase of 441 percent over the same period last year, compared with less than 32 million yuan for the whole of last year. It is expected that with the further deepening of the cooperation with RTI, the company's revenue from the safety syringe project will have very good growth potential.

Integrated production brings cost advantage. The company collects polypropylene particles to produce infusion films and syringes, benefiting from the drop in oil prices this year, which has greatly reduced the company's raw material costs. The gross profit margin of export-oriented high-end safety syringes increased by 14.2 percentage points compared with the same period last year, while the gross profit margin of large infusion products decreased only slightly by less than 3 percentage points, showing the cost advantage brought by the company's integrated production.

The deep cooperation of Jiuding is worth looking forward to. The company announced in June and July this year that it plans to set up Jiuji Pharmaceutical and Health Industry Investment Management Center and Life Insurance Co., Ltd in cooperation with Jiuding. Jiuding is a famous investment institution in China, with very rich investment experience and industrial resources; it is expected that in the future, in subdivided fields such as large infusion and tumor treatment, hospitals and medical devices related to the company's ecology, as well as covering the medical and health industry and its surrounding biosphere and other fields, the company will carry out in-depth cooperation with Jiuding. The development prospect of the insurance industry in China is good, and the life insurance business is developing rapidly and has great potential. It is worth paying attention to the participation process of life insurance companies in the future.

Conclusion:

The company's large infusion product layout in the middle and high end, non-PVC soft bag products have a larger market space, although the lower-than-expected bidding progress and the decline in drug bidding prices and other factors led to a decline in revenue and profit growth in the first half of the year, but as local bidding entered the actual procurement stage, the company's product sales will increase steadily. The echelon product construction of the company is reasonable, the export of safety syringe products has increased obviously, and the future development progress of peritoneal dialysate, hemodialysis concentrate and other products should be paid attention to. The in-depth cooperation between the company and Jiuding in the field of investment is worth looking forward to. We are optimistic about the company's long-term development in the high-end infusion field, and expect the company's earnings per share from 2015 to 2017 to be 0.41,0.51 and 0.67 yuan respectively, corresponding to 87,70 and 54 times PE, respectively.