The company's performance is in line with expectations. In the first three quarters, the company achieved revenue of 13.164 billion yuan, an increase of 28.78% over the same period last year; the net profit of shareholders of listed companies was 260 million yuan, up 29.86% over the same period last year; the net profit of non-listed companies was 256 million yuan, an increase of 24.51% over the same period last year; corresponding to 1.04 yuan of EPS. Of this total, Q3's revenue in a single quarter was 4.644 billion yuan, up 25.99% over the same period last year; the net profit belonging to shareholders of listed companies was 74.79 million yuan, an increase of 29.94% over the same period last year, and the company's performance was in line with expectations. At the same time, the company announced that the net profit attributed to shareholders of listed companies in 2018 was 264 million yuan to 343 million yuan, an increase of 0% over the same period last year.

The equipment business maintained rapid growth. During the reporting period, the company's equipment wholesale business is expected to maintain a rapid growth of about 35%, and drug wholesale business to maintain a steady growth of about 20%. While consolidating the pharmaceutical circulation business in Beijing, the company has made great efforts to expand other provincial markets. Sichuan and Zhejiang markets, which were laid out at the end of last year, have a good momentum of development and have gradually begun to contribute income and profits. During the reporting period, the company used its own capital of 15 million yuan to increase the capital of Liaoning Jiashitang, a wholly-owned subsidiary, for the business development needs of the subsidiary, and further expand its business expansion in Liaoning.

There was a slight increase in costs during the period. The company's gross sales margin in the first three quarters was 9.93%, up 0.51 ppm from the same period last year, while the net sales margin was 3.42%, down 0.03pp from the same period last year.

During the reporting period, the company's sales expense rate was 2.93%, up 0.18 ppm from the same period last year; the management expense rate was 1.08%, down 0.03 ppm from the same period last year; and the financial expense rate was 1.01%, an increase of 0.31pp over the same period last year, mainly due to factors such as a sharp increase in the company's short-term borrowing. During the reporting period, the number of days of inventory turnover decreased by 2.04 days compared with the same period last year, while the number of accounts receivable increased by 2.84 days compared with the same period last year.

Profit forecast: we predict that from 2018 to 2020, the net profit attributed to the parent company will be 344 million yuan, 441 million yuan and 559 million yuan respectively, and the corresponding EPS will be 1.37 yuan, 1.76 yuan and 2.23 yuan respectively. The current stock price will be 10.4 / 8.1 / 6.4 times corresponding to PE, maintaining the "recommended" rating.

Risk hints: the risk of price reduction of drug and equipment consumables; the risk that the company's extension expansion does not reach the expected level.