Kehua Biotech released its 2017 three-quarter report: For the first three quarters of 2017, the company's revenue was 1,141 billion yuan, up 9.65% year on year; net profit was 186 million yuan, net profit after deducting non-return mother was 178 million yuan, down 8.99% and 6.70% year on year. In the third quarter of 2017, the company's revenue was 390 million yuan, up 11.27% year on year; net profit was 60 million yuan and net profit after deducting non-return mother was 58 million yuan, down 9.93% and 8.70% year on year. Net profit growth is expected to be -10%-10% in 2017. Gross margin declined markedly, dragging down net profit growth. The company's gross margin for the third quarter was 40.22%, down 4.34 percentage points from the same period last year. This may be related to the increase in the share of sales of low-margin agency instruments. Operating income continued to grow steadily in the third quarter, with a year-on-year growth rate of 11.27%, but net profit increased negatively due to declining gross margin. The expense ratio for the period was well controlled, at 22.19%, down 1.08 percentage points from the previous year. “Instrument+reagent” develops collaboratively, and the advantages of chemiluminescence complement each other. The biochemical business is the product line that has contributed the most to the company's performance. The company uses “instruments+reagents” to consolidate terminal coverage, and the grass-roots market layout enjoys the dividends of hierarchical diagnosis and treatment policies. The company's nucleic acid blood screening business has gained a great advantage in blood station bidding, and is expected to seize the opportunity when the plasma station blood screening policy is implemented. In terms of chemiluminescence, the company's “Self-Produced Excellence+TGS+BioKit” chemiluminescence series products have complementary advantages, and high-end agency products are expected to drive the rapid release of self-produced products. In terms of exports, the company is actively recovering the overseas market share of gold standard HIV products, and the resumption of export business is worth looking forward to. Extend M&A integration channels and actively explore marketing innovation. In addition to strengthening product layout, the company is also actively integrating and optimizing channel resources. Following holding Xi'an Shenke, a dealer in Shaanxi Province, it once again acquired Hitachi Biochemical's South China agent Guangdong Xinyou, and its terminal control capabilities have greatly improved. In addition, the company is also actively exploring innovative marketing models such as collection and packaging, and channel development is expected to help high future performance growth. Maintaining a “buy” rating: The company is a leading in vitro diagnostic company. We are optimistic about the company's advantages in the primary market of biochemical diagnostics, the multi-level layout of chemiluminescence, and the resumption of export business. The company's 2017-2019 EPS is expected to be 0.50 yuan, 0.65 yuan, and 0.82 yuan respectively, and the corresponding PE is 35 times, 27 times, and 21 times, maintaining the “buy” rating. Risk warning: New product development approved, sales promotion falling short of expectations, etc.