Key investment events: The company released its 2017 three-quarter report, and achieved operating income of 16.16 billion yuan (+58.9%) and net profit to mother of 0.41 billion yuan (+80.5%) in the first three quarters of 2017. The third quarter achieved operating income of 6.93 billion yuan (+82.04%) and net profit to mother of 0.175 billion yuan (+37.41%) in a single quarter. The rapid growth in performance is mainly due to strong execution of extended mergers and acquisitions. 1) The company achieved operating income of 16.16 billion yuan (+58.9%) and net profit of 0.41 billion yuan (+80.5%) in the first three quarters of 2017. The main reason was that mergers and acquisitions were accelerated in the context of the two-vote system. The number of unequal control deliveries completed in the first half of 2017 was 16, consolidated revenue of 1.25 billion yuan, and consolidated profit of 57.14 million yuan. Since most of the target consolidation period occurred after May, we estimate that mergers and acquisitions were postponed in the first three quarters Contributions to the company's revenue and profits increased compared to the interim report. 2) The company's net interest rate increased by 0.72 percentage points in the first three quarters. Among them, gross margin increased by 0.39 percentage points, mainly benefiting from the increase in equipment ratio; sales expenses decreased by 0.24 percentage points and management expenses decreased by 0.4 percentage points, reflecting scale effects. 3) The third quarter achieved operating income of 6.93 billion yuan (+82.04%) and net profit to mother of 0.175 billion yuan (+37.41%). The reason why the revenue growth rate was faster than the net profit growth rate of the mother was that some major mergers and acquisitions were non-wholly-owned mergers and acquisitions, and the share of minority shareholders' revenue increased 17% in 2016 Q3 to 30% in 2017 Q3. The core business is pharmaceutical distribution, which is currently undergoing rapid expansion. After divesting loss-making industrial assets in 2015-2016, the core asset was pharmaceutical circulation. The company currently covers the pharmaceutical commercial logistics network system in 11 provinces (cities) in China. The core area is Shandong, and other advantageous regions are Henan, Hubei, Xinjiang, Anhui, Shaanxi, Hunan and Heilongjiang. In 2016, 6 platform companies (provincial level) were established, and business expansion was carried out on the basis of platform companies, which is expected to enhance the company's centralized procurement bargaining capacity, warehousing and logistics allocation efficiency, and overall competitive strength in bidding within the region. The main expansion route is epitaxial mergers and acquisitions. It is estimated that there will be close to 30 mergers in 2017, mainly in regions with traditional advantages such as Beijing, Hunan, Anhui, Shandong, and Heilongjiang. In the field of pharmaceutical distribution, the company was the first company to implement GPO in the industry. Currently, Haiwang GPO is mature in operation in Shandong. GPO in Anhui is progressing, and it is expected to seize a larger market share through GPO. Entering Proton Healthcare is a scarce target for A-share high-precision medical equipment. The company partnered with Provision to advance proton therapy. ProNova, a subsidiary of Provision, can produce compact proton therapy devices using patented superconductivity technology, and the product is being approved and registered with the FDA. Provision also has a comprehensive cancer diagnosis and treatment center, and has become one of the world's leading cancer treatment centers, providing a full range of solutions for oncology treatment. According to statistics from the 21st Century Economic Report, more than 40 hospitals in China have applied for the construction of proton therapy centers. If calculated at 1.5 billion yuan per set, the domestic proton market space will reach 60 billion yuan. We believe that the company is expected to share the domestic market through joint ventures. The company is a scarce target for A-share high-precision proton therapy. Profit forecasting and valuation. We expect the company's EPS in 2017-2019 to be 0.24 yuan, 0.32 yuan, and 0.41 yuan, respectively. The corresponding PE is 26 times, 20 times, and 16 times, respectively. The valuation is relatively reasonable for a comparable company, and the first coverage gives a “gain” rating. Risk warning: Risk of epitaxial mergers and acquisitions falling short of expectations, risk of impairment of goodwill.