Key investment events: The company announced that it signed an “Stock Acquisition Intent Agreement” with Beijing Guowei Dahui Medical Fund, the controlling shareholder of the Beijing National Health Reproductive Hospital, to acquire no less than 20% of the shares held by Guowei Dahui Fund. The transaction price is yet to be determined. Since Mr. Weng Jian, the executive partner of Guowei Dahui Fund, the transaction party, is a direct family member of Mr. Weng Kang, the actual controller of Medi Technology, this acquisition constitutes a related transaction. The expansion of the assisted reproduction business highlights the company's determination to enter the field of reproductive health services. In October 2019, the company announced that it had completed the acquisition of 51% of Haikou Marie Hospital's shares, priced at 388.62 million yuan, and officially entered the assisted reproduction business. The proposed acquisition of some of the shares in the National Health and Reproductive Hospital is a new attempt by the company to enter the assisted reproduction business outside of Haikou. National Health Reproductive Hospital has a registered capital of 36.075 million yuan and net assets of 175.314 million yuan. Its shareholding structure is 96.95% of the shares held by Guowei Dahui Fund and 3.05% by the Institute of Science and Technology of the National Health Commission. The latter is a scientific research institution directly under the National Health Commission. It is the World Health Organization's Cooperative Research Center for Human Reproduction. It has official operating qualifications to carry out assisted human reproduction techniques: artificial insemination technology and artificial insemination technology for sperm supply, and is one of the 27 human sperm banks approved by the state. The National Health and Reproductive Hospital is a research center and clinical medical center. It has a strategic partnership with the National Key Laboratory of Male Reproductive Health. It has 22 physicians and more than 50 operating beds. The main directions are infertility treatment, reproductive health care, gynecological diseases, male diseases, and health services. From January to May 2020, the National Health Reproductive Hospital achieved a total sales revenue of 165,000 yuan and net profit of 1,034 million yuan. We believe that the company continues to expand its assisted reproduction business in the Beijing region, demonstrating the company's determination to enter the field of reproductive health services. The National Health and Reproductive Hospital will make important contributions to the company in both the fields of technology and the market. In the 100 billion “blue ocean” market for assisted reproduction, the market share of private enterprises with technology and brand power is expected to continue to expand. According to Frost & Sullivan statistics, in 2014-2018, China's assisted reproduction market increased from 3.7 billion US dollars to 4.8 billion US dollars. The 5-year CAGR was 15.8%, and the 5-year CAGR is expected to reach 14.5% from 19-23. In 2018, the penetration rate of assisted reproductive technology in China was only 7%, and the price of IVF technology was 3-5 million yuan per cycle, which is about 3 times different from the US. Driven by factors such as the infertility rate continuing to rise and the level of surgical payments rising, the industry has a solid logic of rising volume and price. Referring to Japan's 30-year experience in leading the aging trend and China's huge population base, China's long-term market space for assisted reproduction is over 100 billion dollars. In recent years, industry entry license approval standards and approval cycles have improved markedly, and the development of later entrants to the industry has been limited. Licenses for the assisted reproduction industry are scarce, top public hospitals are in short supply, and waiting times are long. Meanwhile, leaders in the private sector are expected to expand their share with advantages such as advanced technology and outstanding brand power. Investment suggestions: We expect the company's operating income in 2020-2022 to be 4.04, 5.46, and 748 million yuan, respectively, with growth rates of 21.3%, 35.2%, and 36.9% respectively; the company's net profit for 2020-2022 is expected to be 0.64, 0.92, and 126 million yuan, respectively, with growth rates of 36.3%, 44.7% and 36.6%, respectively. Earnings per share from 2020 to 2022 were 0.57, 0.82, and 1.12 yuan respectively. The current stock prices corresponding to PE are 88 times, 61 times, and 45 times, respectively. Based on the company's entry into the assisted reproduction blue ocean market, it is committed to building a public company that develops in the field of medical IT and assisted reproductive medical services, giving the company an -A suggestion to increase its holdings. Risk warning: There is uncertainty about the acquisition, and the assisted reproduction business is not progressing as expected.