Key investment matters: The company announced the 2017 interim report: the first half of the year achieved revenue of 360 million yuan, an increase of 22.55% over the previous year; realized imputed net profit of 37.1285 million yuan, an increase of 2.72% over the previous year, and net profit attributable after deduction of 33.4219 million yuan, a decrease of 7.60% over the previous year. In the middle of the year, the company plans to use the capital reserve fund to increase share capital, 10 to 4. Ping An's view: Business expansion is accelerating, and price cuts are transmitted over time, affecting the current gross profit margin: the company achieved revenue of 360 million yuan in the first half of the year. After deducting the combined revenue brought by Beijing, Jingyang, Tengwei, and Tianjin Xinnuo Henghong, its endogenous growth was 350 million yuan, an increase of 19.00% over the previous year. The overall gross profit margin was 31.79%, down 4.83PP from the same period last year. The main reason for the decline in gross margin is that terminal prices have declined in some regions represented by Hubei (accounting for nearly 40% of the company's revenue), yet the pressure to cut prices has not spread to the manufacturing side; in the short term, all of them will be borne by channel providers. As the impact of price cuts spreads, the company's gross margin will recover somewhat in the second half of the year. In terms of cost ratio, the sales expense ratio for the first half of the year was 8.30%, down 0.17PP from the same period last year; the management expense ratio was 8.35%, an increase of 0.53PP over the same period last year, mainly due to the increase in employee remuneration, hospitality, and travel expenses after entering the national expansion phase. The nationwide layout is ongoing, and upfront investment is increasing: the company's previous sales were mainly in Lianghu, and it also had a small market share in Shanghai and Jiangsu. Since its listing, it has expanded to all provinces across the country, and has now covered Shandong, Jiangxi, Henan, Fujian, Chongqing, Guangdong, Heilongjiang, Tianjin, Guangxi, Beijing, and Jiangsu. Among them, Shandong Celis has already achieved profit. Under the intensive sales model, the company will invest in equipment in the laboratory departments of new hospital customers in advance, thereby improving the hardware level of hospital laboratory departments and paving the way for subsequent procurement of reagents in hospitals. In the first half of the year, the company's fixed assets - intensive sales business assets increased by 48.85 million yuan, compared with an increase of 1991 million yuan in the same period in 2016. It can be seen that the company's business promotion has accelerated markedly. Meanwhile, in the first half of the year, the company added 51.57 million yuan in inventory, mainly inspection equipment that has not yet been launched. Based on this, it can be roughly deduced that the company's equipment investment scale may be further expanded in the second half of the year. Increased upfront investment means an increase in potentially intensive orders. Taking into account the progress of the company in opening subsidiaries in various provinces in the first half of the year, it is expected that the company will receive more intensive orders from level-III hospitals around the fourth quarter, and may even see the implementation of contracts for the construction of more regional testing centers. Lianghu IVD is the leader in intensive supply, rapidly expanding the national market, and maintaining the “recommended” rating: the company started in the Lianghu market and was the first batch of channel providers to carry out intensive laboratory supply services. After listing, the company used the power of the capital market to rapidly expand into the national market. Currently, it is in the development stage, and upfront investment is increasing. We expect that contracts in various regions will gradually be implemented around the fourth quarter, providing additional growth for subsequent business development. Maintain the 2017-2019 EPS forecast of 1.76, 2.36, and 3.12 yuan, and maintain the “recommended” rating. Risk warning: Channel expansion falls short of expectations, policy risks.