Event: In 2017, the company achieved revenue of 26.477 billion yuan, an increase of 22.34% over the previous year, net profit of 4.101 billion yuan, an increase of 22.77% over the previous year, and realized net profit of 4,028 billion yuan after deduction, an increase of 21.55% over the previous year. Looking at Q4 in a single quarter, it achieved revenue of 6.962 billion yuan, an increase of 34.25% over the previous year, realized net profit of 950 million yuan, an increase of 26.83% over the previous year, and realized net profit of 885 million yuan after deduction, an increase of 20.28% over the previous year. Opinion: 1. Performance is in line with expectations, and the share of sustainably growing businesses such as Chinese medicine tablets, pharmaceutical trade, and medical devices is increasing year by year. The company achieved steady growth of 22.34% on the revenue side and 22.77% on the net profit side, in line with market expectations. Overall, the three business segments of Chinese medicine tablets, pharmaceutical trade, and medical devices, which continue to grow rapidly, became the engines of the company's performance growth. Looking at the main business segment: Chinese medicine tablets: achieved revenue of 6.158 billion yuan in 2017, an increase of 30.93% over the previous year, and gross margin of 34.00%, down 1.37 percentage points from the same period last year. The Chinese medicine tablet industry is booming (not limited by the share of drugs or zero bonuses). As a leader, the company also has smart pharmacies to seize share and achieve rapid growth. Chinese herbal medicine trade: In 2017, revenue was 5.857 billion yuan, an increase of 1.18% over the previous year, and gross margin was 24.47%, an increase of 0.35 percentage points over the same period last year. The share of the cyclical Chinese herbal medicine trade business has declined year by year. In 2017, it only accounted for 22.12% of revenue, while the share of the Chinese medicine tablets, pharmaceutical trade, and medical devices sectors with growth attributes has increased year by year. Pharmaceutical trade: In 2017, revenue was 9.599 billion yuan, up 31.44% year on year, and gross margin was 29.85%, down 0.53 percentage points from the same period last year. We estimate that the pharmaceutical trade business accounts for about 60%-70% of the Chinese pharmacy hosting business. The signing of new managed pharmacies and the company's layout of medical services for supply chain management are the main driving forces driving the growth of pharmaceutical trade. We judge that the growth rate of the stock business is about 10%. Medical devices: In 2017, revenue was 1,990 billion yuan, which more than doubled year on year by 117.88%, and gross margin was 29.54%, an increase of 5.8 percentage points over the same period last year. In 2017, the company focused on the distribution business of medical devices with high-value orthopedic consumables, and built a medical device service platform through a parallel model of self-construction and acquisition. At present, the medical device business has covered about 90% of the country, representing high-consumption medical devices including Zimmer-Biomet (Zimmer-Biomet), Smith & Nephew (Smith & Nephew), Chuangsheng, and Kanghui. Among them, the varieties of the country's general generation include Kanghui balloons, American WRIGHT artificial bone, ZIMMER TRAUMA, BIOMET TRAUMA, etc. Regional agents include Kandi's stapler, aesthetic arthroscope, Kang Hui Trauma & Spine, etc. Health food: In 2017, it achieved revenue of 1,077 billion yuan, a year-on-year increase of 4.86%, and gross margin of 44.49%, an increase of 1.63 percentage points over the same period last year. Due to the impact of the policy environment on the direct sales business, the company's health food growth rate has slowed down. In terms of financial indicators, the company's sales expense ratio, management expense ratio, and financial expense ratio were 2.80%, 5.04%, and 3.66% respectively, up 0.22pp, 0.25pp, and 0.32pp respectively from the same period last year. We believe that the changes in the company's expense ratio are mainly related to changes in the business structure. Conclusion: We expect the company's net profit in 2018-2020 to be 50.04, 61.96, and 7.636 billion yuan, corresponding growth rates of 22.03%, 23.80%, 23.26%, and corresponding PE of 22x, 18x, 14x. The company's various business trends are improving, and are not affected by negative policy disturbances. At the same time, the performance growth is sustainable and the share of businesses that can enjoy higher valuations will gradually increase. In the long run, the overall valuation center is expected to move up and maintain a “highly recommended” rating. Risk warning: Prices of Chinese herbal medicines fluctuate, and the progress of various GPO businesses falls short of expectations.