Net profit increased by 33.28%. First-quarter results slightly exceeded expectations. In the first quarter of 2018, the company achieved revenue of 9.135 billion yuan (+27.7%), total profit of 1,699 billion yuan (+17.58%), and net profit of 1,423 billion yuan (+33.28%). Performance continued to grow steadily. The growth rate of total profit fell short of the growth rate of revenue during the reporting period, mainly due to the increase in the company's business during the reporting period, sales expenses increased by 79.78% year on year; financial expenses increased 39.46% year on year; at the same time, asset impairment losses increased by 466.816 million yuan over the same period last year. The high growth rate of net profit is mainly due to the high income tax rate in the same period last year. The rapid layout of smart pharmacies has promoted the growth of the tablet business. Since June 2015, the company has rapidly promoted the smart pharmacy model in places such as Shenzhen, Guangzhou, Beijing, Yunyu and other places. By the end of 2017, there were more than 250 smart pharmacy cooperation organizations, and the daily prescription volume reached 25,000. The rapid expansion of smart pharmacies is also driving the growth of the company's tablet business. In 2017, the company's tablet business achieved 30.9% growth on a high base, with revenue reaching 6.158 billion yuan. The growth rate is faster than the industry average, and the market share has further increased. We estimate that smart pharmacies contributed more than 1 billion yuan to the increase in Chinese medicine tablets in 2018, and that the overall scale of Chinese medicine tablets is expected to exceed 7.5 billion yuan (a growth rate of about 25%). The State Council's recent decisions on promoting “Internet+Healthcare” and encouraging the promotion of “smart Chinese pharmacies” and other pharmaceutical services will support the full penetration of Kangmei's smart pharmacies. Smart pharmacies will usher in a golden period of development. The layout of the entire Chinese medicine industry chain is getting better and better. The layout of the big health industry was initially completed. Since the layout of Chinese medicine tablets in 2002, the company has continued to expand upstream and downstream of the industry, constructing the entire traditional Chinese medicine industry chain layout. In 2017, the company obtained the pilot qualification for traditional Chinese medicine formula granules in Guangdong Province, and has now formed a complete layout and industrial system for the big health industry. Pharmaceutical and medical device trade in the supply chain business (+117.9%) grew high in 2017 due to its own channel advantages and brand effects. In March 2018, the company announced the acquisition of 80% of the shares of Fuzhou Smyre Medical Devices Co., Ltd. to further improve the industrial chain layout. Risk warning: Competition in the tablet industry is intensifying, policy uncertainty, venture capital advice: leading Chinese medicine company with steady growth, maintaining a “buy” rating, expected revenue of 318.8/382.5/45.45.4 billion yuan in 18-20, growth rate of 20.4%/20.0%/18.7%, net profit of 49.6/59.7/7.16 billion yuan, growth rate of 20.9%/20.5%/19.8%, EPS is 1.00/1.21/1.45 yuan. The current stock price corresponds to PE 22.4/18.6/15.5X 。 Consider that the company is the absolute leader in the tablet industry, and at the same time continuously promotes the upgrading of the entire traditional Chinese medicine industry chain, constructs innovative business models to create new growth points, continues to grow at a high level of performance, and maintains a “buy” rating.