Investment Summary

Events: Pudilan was selected into Jilin and Henan PDRLs; NHFPC recommends CCQG for treatment of children flu; Another product YYG attained production approval.

Investment suggestion: We highlight the company`s comprehensive product mix and pipeline with visible sales growth and improved OTC channel. We predict the topline to grow at 23%/22% in 17E/18E and increase our target price to RMB50.8 (assuming PE 33.5x) with `BUY` recommendation, 22% upside. (Closing price at 12 Jan 2018)

Business Overview

Winter flu may facilitate CCQG sales hike. Since this winter the influenza has been prevalent in many Chinese cities, and the epidemic of children flu is especially serious. On Jan 8th, NHFPC issued a influenza treatment program (2018), in which the Child Chiqiao Qingre Granules (CCQG, Jumpcan`s exclusive product) was recommended for the treatment of children influenza. We expect that winter flu may promote CCQC sales.

Pudilan was selected into Jilin and Henan PDRLs. The company recently announced that its exclusive product Pudilan Anti-inflammatory Oral Liquid (PAOL) entered into Jilin and Henan PDRLs. We highlight that inclusion into Jilin and Henan PDRLs will enlarge PAOL sales more obviously than inclusion into Qinghai PDRL before, given these two provinces have much bigger population base. Compared with Pudilan tablets and capsules, Pudilan oral liquid is more convenient for patient to take. And PAOL as an anti- inflammatory medicine will continue to benefit from national policy restrictions to its main competitors (including antibiotics and traditional Chinese medicine injection). We expect PAOL sales to grow at ~20% YoY in 2017E.