Events:

In the first half of 2015, the company realized operating income of 1.568 billion yuan (+ 13.5%), net profit of 116 million yuan (+ 5.9%) attributable to shareholders of listed companies, net profit of 100 million yuan (- 8.9%) after deduction belonging to shareholders of listed companies, and basic earnings per share of 0.23 yuan. In line with market expectations. Viewpoint:

The growth of hospital revenue is good. The company has good experience and ability to operate hospital projects, and now controls three general hospitals: Suqian Hospital (Grade 3 B), Yizheng Hospital (Grade 2 A) and Anqing Hospital (Grade 2 A). In the first half of this year, the three hospitals increased their business workload and operating income steadily by speeding up the development and application of new technologies and new projects. Suqian Hospital earned 415 million yuan (+ 11.1%) and net profit 54.21 million yuan (+ 19.1%). Yizheng Hospital achieved income of 128 million yuan (+ 13.1%) and net profit of 6.32 million yuan (+ 28.5%). The income of Anqing Hospital, which has been consolidated, is 108 million yuan and the net profit is 7.25 million yuan. The company strengthens budget management, quantitative assessment and cost control, which increases the overall gross profit margin of the medical business by 3.9 percentage points, which is the main reason for the revenue and profit growth of the medical service business in the first half of the year.

The model of "Jinling + Drum Tower" is mature and can be copied. The cooperation mode of "Jinling + Gulou" is to reform and acquire the target hospital by the way of holding the company and taking shares in Gulou Hospital. The director of Gulou Hospital is responsible for the operation of Suqian / Yizheng / Anqing Hospital. The company only sends the Chief Financial Officer and Party Committee Secretary. Suqian / Yizheng / Anqing Hospital department doctors regularly go to Gulou Hospital to study, and Drum Tower Hospital experts regularly go to Suqian / Yizheng / Anqing Hospital to strengthen technical exchanges between the two sides. After several years of cooperation with Gulou Hospital and investment in Suqian / Yizheng Hospital, the company has mastered the method of investment and operation of the hospital, and successfully acquired Anqing Hospital in 2014. So that the company's "Jinling + Drum Tower" model is copied again (consistent with the previous acquisition of Yizheng Hospital model), and achieved good results in the first half of this year, laying a solid foundation for further development in the future. At present, Suqian Hospital is carrying out the construction of the necessary conditions for declaring "third-class and first-class hospitals", especially the construction of key specialties is expected to achieve results this year and next year. In the future, the model of "Jinling + Drum Tower" in Jiangsu Province is expected to continue to be replicated. with the gradual expansion of medical assets, the company also has the possibility of in-depth exploration in the aspects of large-scale procurement of hospital groups and remote diagnosis and treatment between brother hospitals in the future.

The pharmaceutical business has developed steadily. Mailuoning is a product that the company has been on the market for more than 20 years, and its safety has been gradually improved year by year. At present, the company has adopted the most advanced conditions in production equipment, production process, safety inspection and so on. The product is in a mature state and is an important source of income and profit for the company's pharmaceutical business. At present, the product has gradually recovered from the adverse events in 2012, sales revenue has increased, subject to the decline in tender prices and other factors, the gross profit margin of the product has dropped by 8 percentage points, this is the main reason for dragging down the company's overall gross profit margin by 1.6 percentage points, it is expected that as the tender has entered the substantive procurement stage, the sales volume of Mailuoning still has room to improve. In terms of other products, Suilifei (ferrous succinate film-coated tablets), lentinan injection, gelatin sponge and other products are growing stably, and other new products are also being developed actively.

Conclusion: it is optimistic about the advantages of the company in hospital M & An and management through the cooperation mode of "Jinling + Gulou", and it is expected that this model will continue to replicate in the future. We estimate that the net profit of shareholders belonging to the listed company from 2015 to 2017 is 283 million yuan, 338 million yuan and 407 million yuan respectively, and the earnings per share is 0.45 pound 0.54 soybean 0.66 yuan, respectively, and the corresponding PE is 33 pound 27max 22X. Cover for the first time, giving a "highly recommended" rating. Risk hint: the bidding price / sales volume of Mailuoning is not up to the expected risk, and the development of medical services is not up to the expected risk.