Key points of investment

The field of nerve damage repair has great market potential and good development prospects. The company's main product is injectable rat nerve growth factor, which is a nerve damage repair drug. Clinical departments cover a wide range of areas. Among them, the prevalence of Alzheimer's disease and Parkinson's disease, which are the main indications of neurology, has been rising in recent years. As the health awareness of the Chinese population gradually increases, the number of patients requiring neurological damage repair is huge, and the potential market size may exceed 40 billion yuan.

Product advantages are outstanding, and gross margin remains at a high level. The leading product, Jin Lujie - injectable rat nerve growth factor is a new biological product of the first class in the country. It is the first drug in the world to be approved for marketing by the government for neurological damage diseases. Jinlujie has a high gross margin, strong bargaining power for products, and few similar competitors. By reducing the circulation chain, the company gradually increased the factory unit price of products in various sales regions. In 2016, the company's overall gross profit margin was 95.56%, and the net profit margin was 20.36%.

Profit forecast: We expect the company's 2017-2019 EPS (calculated based on issuing 258.38,800 new shares) to be: 1.73, 1.92, and 2.14 yuan respectively. Considering the comparable company's PE level, industry cycle and the company's profit growth, the company was given 20-25 times PE in 2017. We think the company's reasonable price is around 34.6-43.25 yuan. According to this IPO method, the issue price is 32.95 yuan. It is recommended to purchase at this price.

Risk warning: Competition in the neurological damage repair market has further intensified, changes in industry regulatory policies have had a negative impact on the company's operations, and there is a risk that ongoing product line development will fail.