Event: on November 2, the company signed a strategic cooperation framework agreement with Yunnan Industrial Hemp Investment Company (Yungong Ma). The two sides will carry out all-round cooperation in scientific research, extraction, achievement transformation and equity cooperation. Yunnan Provincial Department of Commerce, Yunnan Industrial Investment Group and Yuye Group attended the signing meeting.

Yunnan government strongly supports the development of industrial hemp industry, and the company takes the lead in reaching deep cooperation with Yungong Ma!

Yunnan Industrial Hemp Industry Investment Co., Ltd., a subsidiary of Yunnan State-owned Investment platform Industrial Investment holding Group, is the industrial hemp industry capital operation platform set by Yunnan Industrial Investment Group. It is committed to cultivating industrial hemp into a new pillar industry in Yunnan. The cooperation framework agreement between the company and Yungongma includes: joint cooperation in the construction of China's most advanced cannabis extraction base and the largest industrial hemp ecological industrial park in China; jointly promote scientific research, achievement transformation and equity investment in industrial hemp; and become strategic shareholders of each other's high-quality resources. Industrial hemp industry is a rapidly developing new industry in recent years, with downstream applications covering more than 1000 FMCG products in 14 industries. The Yunnan government continues to increase support for the industrial hemp industry: in September 2020, Kunming International Industrial Hemp Industrial Park, the country's first industrial hemp industrial park, was officially unveiled; in October, Yunnan Industrial Hemp advocated the establishment of Yunnan Industrial Hemp Industry Association. In November, the measures to support the high-quality development of the industrial hemp industry in Kunming (Kunming Economic Development District), the China (Yunnan) free trade pilot zone, were officially released, focusing on supporting the industrial hemp industry in Kunming. We believe that the domestic industrial hemp industry is developing rapidly, and the Yunnan government has great support for the development of the industrial hemp industry. Meirui Health International, as one of the earliest companies engaged in industrial hemp business in China, has certain first-mover advantages. this time, the company has a deep and comprehensive cooperation with Yungong and hemp, and the company is expected to achieve rapid development in the field of industrial marijuana business with the help of industry policy Dongfeng and high-quality government resource platform.

The layout of the company's industrial hemp business has achieved remarkable results, and the products are blooming at home and abroad!

The company's industrial hemp layout has been effective, and a number of products have been launched one after another. Abroad, in 2019, the company Ruilong Biology's CBD atomization brand Cannergy was first listed in Japan, and officially launched in the European market in 2020, the brand has launched a number of CBD atomization products in Japan, and launched the mainstream e-commerce platform and expanded a number of well-known offline chain channels. In the second half of 2020, the company continued to launch new categories in the Japanese market, including tinctures, fudge and beverages, and moved into new channels including drugstore chains, convenience stores and health food stores. On the domestic side, in August 2020, the company's skin care brand "hemp makeup" launched the first single hemp leaf essence repair mask. The omni-channel sales of the mask exceeded 10 million yuan in two weeks, setting a similar sales record in the field of CBD skin care products. We believe that the company's years of deep cultivation and exploration in the field of industrial hemp is an important reason for the market recognition of its products, and the company is expected to continue to maintain a leading position in the field of industrial hemp products by virtue of its first-mover advantage and continuous accumulation.

With the simultaneous development of the company's cell health and other business, the "one two wings" strategy steadily promotes the "one two wings" strategy with high-end health management as the core and cannabinoid medical health application and cell health application as the driving force. Since the beginning of this year, the company's trade business, sales agency business and health care-related business have continued to develop steadily. Among them, the company's cell health business has made many important breakthroughs: in May 2020, the company signed a strategic cooperation agreement with Shenzhen third people's Hospital (the only designated hospital for COVID-19 patients in Shenzhen) to jointly apply for stem cell clinical research base. In August 2020, the first case of multiple myeloma treated with CAR-T cells was completely relieved, and the further exploration in the field of tumor was realized. We believe that the steady progress of the company's traditional business has laid a solid foundation for the company's performance growth, and the cell health business and cannabinoid health business, as the "two wings", are expected to provide a new driving force for the company's performance growth.

Profit forecast and investment suggestion

The previous profit forecast is HK $245 million for 2020-2021, with a profit of HK $126 million. Due to the rapid development of the company's cell health business and cannabinoid health care, it is expected to accelerate the expansion of the company's revenue. However, due to the decrease in the proportion of shares in Yunnan Hansu Biological Co., Ltd., and the decline in CBD prices and other external unfavorable factors, the investment income of the associated company is expected to decrease. For this reason, we adjust the company's profit forecast to: the operating income from 2020 to 2022 is HK $2.65 million, an increase of 12.87%, 13.70% and 14.25% over the same period last year. The net profit of homing reached HK $1.16 million, an increase of 620.22%, 18.01% and 33.86% over the same period last year. In view of the solid and stable traditional business of the company, the industrial marijuana business and cell health business are forward-looking and expanding rapidly, maintaining a "buy" rating.

Risk hints: industrial marijuana should be strictly distinguished from intermediate marijuana and recreational marijuana / drug cannabis; resolutely oppose the legalization of recreational marijuana; industrial cannabis-related businesses may contain policy change risks and R & D operational risks; there is uncertainty about the progress and effectiveness of specific cooperation; at present, China has never approved industrial marijuana for medical and food addition.