Main points of investment

Recently, Kehua Bio released its annual report for 2017. during the reporting period, the company achieved operating income of 1.594 billion yuan, an increase of 14.14% over the same period last year, a net profit of 218 million yuan, a decrease of 6.30% over the same period last year, and a net profit of 206 million yuan, a decrease of 4.48% compared with the same period last year.

Profit forecast and rating: as one of the leading companies in the domestic IVD industry, the company has a wide range of products and sound sales network. The company continues to promote the research and development of new products and the Chaoyang business segment (chemiluminescence, molecular diagnostics, overseas business), which is expected to usher in a recovery of endogenous growth; with the help of Fangyuan Capital, the company is expected to accelerate its epitaxial development and cut into new market segments of IVD and its related industries. We adjust our profit forecast for the company and expect the company's EPS to be 0.47,0.54 and 0.62 yuan respectively from 2018 to 2020, and the share price corresponding to PE at 29,25 and 22 times on April 25, 2018, respectively, continuing to maintain the company's "prudent overweight" rating.

Risk tips: product sales are not up to expectations; epitaxial development is slower than expected; export business recovery is slower than expected.