Key investment matters: (1) The company announced the signing of an intensive service contract with Wuhan Hospital of Traditional Chinese Medicine. (2) The company announced that it signed an intensive service contract with Pingdu People's Hospital for regional testing centers and hospital laboratories. Ping An's view: A new contract has been signed, and business development continues to advance: the company has once again completed coverage of two tertiary hospitals in Wuhan and Qingdao, providing them with test reagents and consumables supply services for the three departments of testing, pathology, and hematology. The expansion of intensive services continues. Among the two hospitals, the Wuhan Hospital of Traditional Chinese Medicine is the top three hospitals, with 1,200 beds, and the cooperation period is 3 years; while Pingdu People's Hospital is the only tertiary hospital in Pingdu City (3B). Judging from the contract, the hospital is a local regional testing center. The hospital has 1,250 beds, which will be gradually expanded to 1,500, and the cooperation period will last for 10 years. Based on the region where the hospital is located and the number of beds prepared, we estimate that the annual purchase amount of these two contracts is expected to reach more than 50 million yuan, and the initial equipment investment is small, which can bring about a significant improvement in the company's performance after official delivery. Furthermore, in both contracts, it can be seen that both the company and the hospital have given clear regulations on the settlement period for product supply: Wuhan Hospital of Traditional Chinese Medicine agreed on a billing period of 6 months, and Pingdu People's Hospital agreed on a billing period of 4 months. In recent years, with the abolition of drug bonuses, most hospitals across the country have a trend of extending account periods, and dealers have borne more financial turnover burdens as a result. However, the billing period agreed between Celis and the hospital is at an average level or even slightly shorter, enabling the company's cash to operate more efficiently. Price reduction pressure is transmitted upstream, and gross margin is expected to increase: in the middle of the year, the company's gross margin declined due to price reduction pressure on the hospital side, but after channel research, we believe that the decline in the company's profit margin was only a temporary situation after the terminal price was adjusted, and the price reduction pressure will inevitably continue to be transmitted to the upstream production side. The company's gross margin had already rebounded at the time of 2017Q3, and this upward trend will continue. Under the pressure of price reduction, the advantages of channel providers with scale advantages and the ability to cooperate deeply with hospitals were demonstrated. Relying on a large number of customer orders, they were able to negotiate prices with upstream suppliers (including foreign suppliers) and obtain lower prices to hedge against terminal price reductions. However, traditional small dealers are unable to effectively transfer pressure, making it more difficult to survive. In the medium to long term, the concentration of IVD channels will increase as a result, and Celis is expected to benefit from this. As the concentration of IVD channels increases, core players will further grow and maintain the “recommended” rating: In recent years, the concentration of IVD channels has continued to increase. Currently, the first phase, led by mergers and acquisitions, is nearing its end, and market redistribution based on service capabilities and resource control has begun, and core players will gain more market share from it. As a leading supplier leading the way in developing intensive supply, Cerris is well tied to hospitals. Coupled with the advantage of scale obtained through national expansion achieved through the capital market, it is expected to grow into a giant in the wave of increased concentration. Without considering undetermined mergers and acquisitions, the 2017-2019 EPS forecast of 1.26/1.69/2.23 yuan was maintained, and the “recommended” rating was maintained. Risk warning: Channel expansion falls short of expectations, policy risk.