Main points of investment

What happened: the company issued a forecast of its results for the third quarter of 2016, with a net profit of 1900-21 million yuan in the first three quarters, a loss of about 58.3 million yuan in the same period last year, and a continuous improvement in the performance in the first three quarters. The net profit in the third quarter was 4.23 million yuan, compared with a loss of about 62.56 million yuan in the same period last year.

The continuous release of drugs + the adjustment of steel structure business leads to the continuous improvement of performance, and the inflection point of the company's performance is looming. The company made a net profit of 1900-21 million in the first three quarters and 223-4.23 million yuan in a single quarter. Compared with the same period last year, the company's performance improved significantly, with all profits in the first three quarters. The main reasons are: (1) the industrial structure of the company has been continuously optimized, the sales scale and gross profit margin of the modern traditional Chinese medicine industry have increased compared with the same period last year, and the company's comprehensive gross profit margin has increased compared with the same period last year. (2) the construction steel structure industry continues to expand new business channels in this period, actively undertake and promote the progress of new projects, and enhance profitability. At the same time, the impairment loss of assets decreased significantly compared with the same period last year, and multiple factors superimposed affected the operating profit of the steel structure industry to turn from loss to profit compared with the same period last year. Considering the continuous volume of the company's core product Sanqi Tongshu capsule and the effect of steel structure business adjustment, we think that the inflection point of the company's performance is looming.

Renaming shows that the company's strategy focuses on the large health industry, and the continuous optimization of the industrial structure is expected to improve the overall profitability of the company. The company's strategy changes the abbreviation of the company from Huashen Group to Taihe Health, which shows the clarity of the company's strategy for the first time after the change of the actual controller of the company. we believe that the company will focus on the big health industry and actively adjust the current industrial structure in the future. actively develop the pharmaceutical industry and improve the company's overall profitability. (1) in the traditional main business, the company will focus on modern traditional Chinese medicine to create large varieties of traditional Chinese medicine, such as Sanqi Tongshu capsule and Biyuanshu oral liquid. at present, the sales of Sanqi Tongshu capsule is more than 300 million yuan. however, the company is mainly concentrated in hospitals in first-and second-tier cities, the company is strengthening marketing channel construction and academic promotion, with the promotion of products in grass-roots hospitals, the company's profit level is expected to further improve. In addition, the company pays attention to the development of the international market and the rich product line of new drug research and development, including Sanqi Tongshu capsule EU international registration study, Sanqi Tongshu capsule (enteric-coated pellets), venlafaxine sustained-release pellets and other drug clinical studies. (2) the company actively responds to the market changes and competitive situation of the steel structure industry. In order to control operating risks and ensure asset safety, the company adjusts its business strategy in time and contracts business according to the principle of "business quality and asset safety first". Fully implement the project manager contract responsibility system, effectively ensure the operation quality of new projects and reduce the risk of capital advance, the company will continue to actively promote the adjustment and reform of the steel structure business model. Promote the light asset management of steel structure companies.

Profit forecast and investment advice. It is estimated that the EPS from 2016 to 2018 will be 0.08,0.10,0.12 yuan respectively, and the corresponding stock price valuation will be 194,146,121times respectively. Considering the small market capitalization of the company, the huge room for improvement after the actual controller and the change of abbreviation, the company has been given an "overweight" rating for the first time.

Risk hints: core varieties may have the risk of price reduction; extension development progress or lower than expected risk.