1Q17 resultsin line with expectation

Taiantang Pharmaceutical announced 1Q17 results: Revenuewas Rmb764mn, up 20.20% YoY; net profit attributable toshareholders was Rmb50mn, up 31.85% YoY, or Rmb0.07 pershare, in line with our expectation.

Trends to watch

1Q17 net income maintained rapid growth; watch forpotential price hikes of key products.

360kad.com: An aggressive and defensive bellwetherin pharmaceutical e-commerce.

Earnings guided to rise 30~45% in 1H17; fastergrowth in 2Q17.

Earnings forecast

We maintain our earnings forecast for 2017/2018 atRmb0.41 and Rmb0.53.

Valuation and recommendation

The stock is trading at 25x/19x 2017/2018e P/E. We maintainour BUY rating and Rmb14.00 target price （34x/27x2017~2018e P/E）， implying 38.75% upside room from thecurrent price.

Risks

Policy uncertainty for online sales of prescription drugs; lowerprices of TCM materials.