Incident: The company released its quarterly report for '19. Revenue, net profit and net profit after deduction were 271 million, 57.31 million, and 41.93 million respectively, compared with -7.56%, +10.99%, and -17.86% respectively. During this period, the company received a subsidy of 22.59 million yuan from the government, increasing the growth rate of net profit. The review is as follows: Digesting channel inventory, we estimate that the terminal sales situation is good. The year-on-year decline in 19Q1 revenue is due to the company's active adjustment of sales structure to absorb channel inventory. At the same time, we estimate that terminal sales will maintain a rapid growth rate of more than 30%. Repayments have improved, and the quality of operations has gradually improved. The net operating cash flow of the 19Q1 company was 11.15 million yuan, the first correction since 18Q1. Cash received from sales of products sold in 19Q1 was 321 million yuan. This is the first time in three years that the difference between cash and operating income received from product sales in the company was positive (+50 million). The smallest difference in the previous quarter was also at the level of -60 million yuan. From this, it can be seen that the company improved significantly in terms of sales payback. The 19Q1 accounts receivable amount was 1,449 million yuan, up from the beginning of the period, but the number of notes receivable during the same period decreased by about 171 million yuan. We estimate that the company reduced the form of notes and increased the repayment method. Overall, the total amount of accounts receivable plus notes receivable in 19Q1 showed a downward trend. In terms of other financial data, the gross profit margin for 19Q1 was 77.69%, down 3.43 percentage points from the gross margin for the full year of '18. We estimate that this is mainly due to increased depreciation for the Chinese medicine industry project with a book value of 640 million yuan and the Chinese medicine technology research and development center project of 199 million yuan after consolidation in 18Q4. The 19Q1 sales expense ratio and management expense ratio increased by 2.83 percentage points and 3.18 percentage points, respectively, compared to the full year of '18, but decreased significantly from the corresponding expense rate for the full year of 16/17. Research and development expenses for 19Q1 were 12 million yuan, +207% over the same period last year. Our estimate is mainly due to the increase in phase IV clinical programs for classic traditional Chinese medicines. We look forward to the release of dividends from Dingkundan's new base drug catalogue. Dingkundan entered a new version of the basic drug catalogue after 18 years of adjustments. Currently, the new version of the basic drug catalogue is still being implemented in various regions. After implementation, it is expected that Dingkundan's coverage and sales in primary medical institutions will increase. Profit forecast: We expect the company's net profit from 19-21 to grow by 10%, 36%, and 30%. The corresponding EPS is 1.17/1.59/2.06 yuan, respectively. The current stock price corresponds to a valuation of 19pe of about 28x. Adjusted to a “Prudent Recommendation - A” rating. The national sales network built by the company has been formed, and cooperation with major terminals has gradually begun to improve. We expect 2019 to be a critical year for the company to consolidate sales performance, optimize payback, and improve cash flow. We will wait for the company to accumulate and subsequent performance take-off, and give it a “Prudent Recommendation - A” rating. Risk warning: Product sales fall short of expectations; risk of bad debts; risk of production and operation.