The company publishes annual reports and quarterly reports. Net profit in 2017 reached 4.101 billion yuan (+22.77% yoy), 2018 Q1 revenue was 9.135 billion yuan (+27.68% yoy), and net profit was 1,423 billion yuan (+33.28% yoy). The company's revenue growth rate for the first quarter of 2018 slightly exceeded market expectations. We estimate that the main reasons for the rapid increase in performance include: smart pharmacies are driving high growth in the Chinese medicine tablet business, rapid growth in the pharmaceutical business, and rising prices of some varieties of Chinese herbal medicines. We have raised our profit forecast. The estimated net profit for 2018-2020 is 5.127 billion/6.283 billion/7.591 billion yuan (+25%/+23%/+21% of the same period last year). The current market capitalization is 111.9 billion, corresponding to PE 22 times /18 times /15 times. It is still one of the best and least expensive valuations for growth among large market capitalization pharmaceutical stocks, and we continue to recommend it. The PE valuation is 30 times that of 2018, and the target market value is 153.8 billion. Currently, the stock price space exceeds 40%, maintaining the buying rating. Key points supporting the ratings In 2017, the sales volume and profit share of Chinese medicinal tablets have surpassed herbal medicine trade, becoming the company's largest business sector. The company's smart pharmacy is fully deployed in more than 10 Tier 1 and 2 cities, including Shanghai, Beijing, Guangzhou, Shenzhen, Rong, Yu, Lu, and Kungui, and hundreds of hospitals. On the one hand, it is rapidly expanding its share in the tablet market, and on the other hand, it has formed a deep cooperative relationship with counterpart hospitals, laying a good foundation for the further promotion of the “Internet+Medical Service” O2O model. Furthermore, it is expected that formula granules will contribute to increased performance in 2018. In 2017, the revenue of the Chinese herbal medicine trade reached 5.857 billion yuan (+1.18% year-on-year), and the gross margin stabilized at 24.47%. After years of hard work, the profit model of the company's Chinese herbal medicine trading business got rid of the original model of relying on heaven to eat, became more and more stable, and gradually transformed into a comprehensive supply chain service provider. In 2017, pharmaceutical trade achieved revenue of 9.599 billion yuan (+31.44% year-on-year) and medical devices achieved revenue of 1,990 billion yuan (+117.44% year-on-year). The rapid growth in pharmaceutical distribution business benefited from the promotion of overall hospital services, cooperative construction, and hospital logistics extension projects promoted by various regions. As a centralized supplier of pharmaceutical equipment entering hospitals, the company has gained strong negotiation ability with upstream industrial enterprises. The main risk faced by ratings The adjustment of the company's management structure is slower than the progress of multi-tier business development. Valuation, we raised our profit forecast. The estimated net profit for 2018-2020 is 5.127 billion/6.284 billion/7.591 billion yuan (+25%/+23%/+21% of the same period last year). The current market capitalization and stock price correspond to PE 22 times /18 times/15 times. The PE valuation is 30 times that of 2018, and the target price is 31 yuan. Currently, the stock price space has reached 38%, maintaining the buying rating, and is highly recommended.