Products: high-quality paste to enhance profit margins, product portfolio sales to maximize the effectiveness. Classic plaster products gradually replace general medicine, and the profit margin is significantly improved. (1) from the point of view of the company's income, the price of a box of Zhuanggu musk pain ointment is 5 yuan and 10 stickers, while the price of a box of fine products is 20 yuan and 10 stickers, and the price of each paste is increased from 50 cents to 2 yuan. (2) from the point of view of channel profit, the price of Zhuanggu musk analgesic ointment is more than 4 times that of general medicine, and the dealer can get higher profit, which will promote the high-quality product more actively, which will also accelerate the substitution of high-quality products and the penetration of the terminal market. "dredging collaterals + activating blood circulation"

The new portfolio promotes the recovery of product performance. According to the company's data, affected by the spread of the epidemic and hindered the resumption of work, the income of the patch in the first half of this year was-3.92% compared with the same period last year, while the star product of Tongluo Qutong ointment increased by about 5% in the first half of this year. To a large extent, it benefited from the combined marketing of "Tongluo + Huoxue", which also led to the sales of Huoxue Zhitong tincture, which increased by 15% in the first half of this year compared with the same period last year.

Marketing: cultivate new consumption scenes and expand potential consumers. By sponsoring events and other ways, the company will accurately launch its products to younger sports groups to convey the brand concept of "love without pain" of Lingrui Pharmaceuticals. The company also plans to upgrade the packaging of the original products, pay more attention to the sense of youth and refinement in packaging design, promote the image transformation of "sports", "fashionable" and "younger" of the antelope brand, and deeply integrate the diversified needs of consumer levels and consumer groups. In addition, the company also revolves around the product portfolio of "dredging collaterals and activating blood circulation", aiming at the bone pain of sports people and the troubles of shoulder and neck disease of office workers, enhance the stickiness of young consumers, and release the attraction and appeal of sports people.

Channels: primary health care & online e-commerce make concerted efforts to infiltrate the terminal market through multiple channels. The products made by the primary care team are mainly old products that return to production, such as metformin, which is a new source of revenue growth for the company. According to company data, H1 primary health care channel revenue accounted for 5% of the total volume in 2020, accounting for 7% of the total volume, and even in the context of the epidemic, the year-on-year growth rate exceeded 10%. Sinking the primary medical channel, on the one hand, can put the comprehensive promotion of the top-level products "dredging collaterals + promoting blood circulation" and Zhuanggu musk pain ointment in place; on the other hand, through the survival of the fittest, it will also correspondingly stimulate OTC channels to improve human efficiency and constantly reduce the company's marketing expenses. The construction and promotion of online e-commerce channels have three positive effects: (1) effectively reduce the cost rate, the cost rate of e-commerce channels is much lower than that of traditional channels, and the human efficiency is greatly improved. In the future, with the continuous development of e-commerce channels and the continuous increase of their share, it can have a very positive impact on the decline of the overall sales expense rate. (2) to meet the diversified needs of consumers, especially for young consumers to buy online e-commerce channels; (3) to enhance the attribute of consumer goods, which is not limited to traditional OTC channels, to create more consumption space and improve the overall income of the company.

Profit forecast and investment advice: the company's management team is younger and professional, injects more fresh blood and advanced management ideas into the company, and improves management efficiency. At the same time, the brand concept is closer to the young consumer group, which helps to upgrade the antelope brand. Driven by the continuous optimization of product structure, the continuous upgrading of brands and the accelerated expansion of channels, it will bring long-term and sustainable marginal profits. We forecast that the company's operating income from 2020 to 2022 will be 2.424 billion yuan, 2.787 billion yuan and 3.259 billion yuan respectively, an increase of 12.4%, 15.0% and 16.9% respectively over the same period last year. The net profit of homing was 343 million yuan, 419 million yuan and 526 million yuan respectively, up 16.6%, 21.9% and 25.5% respectively over the same period of last year. 0.60, 0.74 and 0.93 respectively. Corresponding to the closing price on September 18, PE was 18X/14X/12X, maintaining the "recommended" rating.

Risk tips: the progress of research and development is not as expected, the promotion of new products is not as expected, the effect of sales reform is not as expected, the risk of fluctuation of raw material costs, the risk of brand upgrade failure, and so on.