2016 results in line with expectation

Yibai Pharmaceutical announced 2016 results: Revenue rose11.64% YoY to Rmb3,687mn and net profit attributable toshareholders rose 103.22% YoY to Rmb385mn, implying EPS ofRmb0.49. The company also announced 1Q17 results: Revenuerose 26.37% YoY to Rmb931mn and net profit rose 22.27% YoYto Rmb101mn. Results are in line with expectation.

Trends to watch

Steady growth in pharmaceutical manufacturingbusiness; anti-tumor drugs delivered >10% growth.

Revenue from medical services grew rapidly,becoming a new growth driver.

Selling expense ratio fell sharply.

Earnings forecast

Maintain BUY. As its traditional businesses may growfaster, driven by the new state health insurance scheme,we raise our earnings forecasts 11% from Rmb0.55 toRmb0.61 per share for 2017, and 20.9% from Rmb0.61to Rmb0.74 per share for 2018.

Valuation and recommendation

The stock is trading at 27x 2017e P/E and 22x 2018e P/E. Wemaintain our BUY rating and Rmb20.00 target price (21.88%upside room from the current price), implying 33x 2017e P/E and27x 2018e P/E.

Risks

Price cuts for TCM business; expansion of cancer treatmentbusiness disappoints.