Matters: We recently conducted research on the company and fully communicated with the company about some situations that the market is concerned about. The main point of view 1. A strong sales force is the company's core competitiveness. Two-thirds of the company's performance comes from OTC sales, and a strong terrestrial marketing team is the company's core competitiveness. The company's self-built marketing team consists of more than 4,000 people, covering a total of 300,000 retail pharmacies across the country, accounting for about 71% of the number of retail pharmacies in the country, and this figure will rise to 80% in the future. At the same time, the company has developed more than 3,570 level-II hospitals, including more than 1,200 level-III hospitals, accounting for 56% of the country's number of level-III hospitals. Furthermore, in order to cooperate with the gradual implementation of hierarchical diagnosis and treatment, the company has also stepped up its channel development work for primary medical institutions and developed about 30,000 new primary clinics. The drug sales revenue from primary clinics is expected to become a new growth point for the company's future performance. 2. The core variety continues to gain strength. It is worth expecting that the company's core variety, Yindan Xinnaotong softgels, will benefit from the continued high growth of more than two digits in the cardiovascular proprietary Chinese medicine market and the influence of the replacement effect of traditional Chinese medicine injections. The growth rate for the full year of 2016 is expected to be more than 20%, becoming the main driver of the company's performance; the granule product line that the company has focused on in recent years has also achieved rapid growth under the concerted efforts of upstream and downstream links, and is expected to become another important support for the company's performance in the future; and the second- and third-tier varieties of capsule tablets are also receiving terminal support due to the clear range of indications and precise curative effects In agreement with consumers, it is expected that the steady growth trend will continue to be maintained in the future. Furthermore, the company has also invested heavily in new drug research and development to try to make a breakthrough. The varieties currently identified for research cover different fields such as anti-tumor drugs, antiviral drugs, and nephropathy drugs, including different varieties of small-molecule targeted drugs, proprietary Chinese medicines, and biopharmaceuticals. Through cooperation with research institutes, the company has made up for the company's technical shortcomings in the research and development of new drugs, further improved the company's R&D and innovation capabilities, and accelerated the training of the company's high-level technical personnel. However, at present, it takes a long time to transform the results of the varieties being developed, and there is no obvious supporting effect on the company's performance in the short term. 3. Build a comprehensive service chain for diabetes management and treatment with Dengning Tongluo capsules as the ****ning Tongluo capsules are the company's exclusive variety born from ancestral medicine recipes. They have achieved excellent results in small-scale randomized double-blind clinical trials: they have significant effects on glycated hemoglobin, fasting blood sugar, and post-meal blood sugar, with efficiency rates reaching 84%, 85%, and 85%, respectively. If the test results can be further confirmed and promoted, it is of great clinical significance for improving the current situation in China's major diabetic countries. Currently, Dengning Tongluo capsules have not obtained approval for new drug registration, but the company is cooperating with hospitals in the form of in-hospital preparations of traditional Chinese medicine. By the end of 2016, there were 27 self-built and contracted medical institutions of various types in Guizhou Province and 1 newly opened hospital outside the province. With the official promulgation and implementation of the “Traditional Chinese Medicine Law”, Dangning Tongluo capsules are expected to become the biggest beneficiary of in-hospital preparations. At the same time, the company, together with the University of Hong Kong and West China Hospital of Sichuan University, has carried out a series of collaborations on the active ingredients and pharmacology of Tongning Tongluo capsules. Some of the research results are expected to be published in the near future. All of the above are undoubtedly expected to promote rapid clinical expansion of the product. Furthermore, the company signed the “Guizhou Internet+Chronic Disease Medical Service” strategic cooperation agreement with the Guizhou Provincial Health Planning Commission and Tencent Computer, using the company's diabetes specialist hospitals as carriers to create an “online+offline” comprehensive diabetes management and treatment industry chain. Currently, the number of active users has reached more than 40,000, and has received unanimous praise from experts inside and outside the province. 4. Investment suggestions: We expect the company to achieve operating income of 2,279 billion yuan, 2,689 billion yuan and 3300 billion yuan in 2016-2018, net profit of 505 million yuan, 632 million yuan and 792 million yuan, net profit per share of 0.36 yuan, 0.45 yuan and 0.56 yuan respectively, corresponding to PE 49 times, 39 times and 31 times, respectively. Given the company's excellent marketing, reasonable product layout, and the chronic disease management business centered on sugar nitride capsules is expected to expand rapidly for the first time. Coverage gives a “recommended” rating. 5. Risk warning: the risk of price reduction in tenders for core varieties; the risk that the promotion of Tongluo Tongluo capsules is not as good as expected.