Investment point 1. Incident: The company used its own capital to invest RMB 4,938,193.24 to increase the capital of Wuhan Coredy Medical Products Co., Ltd. (hereinafter referred to as “Coredy”), and acquired 37.31% of the shares with RMB 7440201.76, using a total of 12,378,395 yuan of its own capital. After the transaction was completed, the company accounted for 62.08% of Curdy's shares, and Coredy became the company's holding subsidiary. II. Incident review: The layout of the hemodialysis consumables production base has basically been completed, covering major densely populated areas. Paulette's hemodialysis industry chain layout focuses on the production and sale of upstream hemodialysis consumables. After this acquisition was completed, the company basically completed the layout of dialysis powder manufacturing bases in Northeast China, North China, Central China, South China, East China and South China. 1) The production approval barriers for dialysis powder, liquid and other consumables are high, and the transportation radius is limited. Currently, there are 33 domestic manufacturers with qualifications to produce dialysis powder and liquid. Although the technical threshold is not high, the administrative threshold is particularly high, resulting in a relatively stable number of qualified enterprises in recent years. At the same time, since the transportation cost of hemodialysis consumables accounts for 20%-27% of the total cost, the shorter the distance, the lower the cost, so the reasonable transportation radius is 800 kilometers. 2) After completing the acquisition of Coredy, the company's hemodialysis powder and liquid consumables production bases covered densely populated regions in Northeast China, North China, East China, South China, and Central China. Among them, production capacity has already been formed: Liaoning Hengxin Biotech, Tianjin Zhixin Hongda, Changzhou Huayue, and Wuhan Coredi. There are 6 consumables production bases under construction, including Nanchang Polite and Zhuhai Polite. The national layout of hemodialysis consumables production has basically been completed. 3) The layout of the entire hemodialysis industry has begun to take shape. Upstream: Hemodialysis consumables production base layout, D30 dialysis machine formation and sales, and dialysis device development in Germany; midstream: terminal hospital resources are obtained through the layout of hemodialysis channel providers. Currently, channel companies include Baorui Healthcare (Guizhou hemodialysis channel), Shenbao Medical (Jiangsu, Zhejiang, Shanghai, Shandong, Anhui, etc.), Shenzhen Baoyuan (covering hemodialysis channels in Guangdong); downstream: Entering medical services and controlling dialysis centers. The company has deployed the field of hemodialysis medical services through various forms, including cultivating hospitals with nephrology and hemodialysis centers in vitro, and deploying equipment to operate hospital hemodialysis centers. 3. Profit forecast and investment recommendations: We expect the company's sales revenue in 2017-2019 to be 785 million yuan, 1,030 million yuan and 1,342 million yuan, and net profit attributable to the parent company of 9024 million yuan, 11.87 million yuan and 157.93 million yuan. The corresponding diluted EPS is 0.62 yuan, 0.81 yuan and 1.08 yuan respectively. We believe that the company has a clear layout of the entire hemodialysis industry chain, upstream product production, midstream channel coverage, and downstream medical services to control patients. Therefore, we continue to recommend and maintain our “Overweight” rating. 4. Risk warning: The development of medical services for nephrology fell short of expectations; the expansion of production capacity for hemodialysis consumables fell short of expectations; and the overseas market for monitors was affected by factors such as policies and exchange rates.