FY17profit guidance maintained    CBPO reported sales/non-GAAP profit of USD100m/39m, representing YoYgrowth of 15%/15% in USD and 15%/15% in RMB, respectively. The revenuegrowth was mainly driven by placenta polypeptide, while albumin and IVIGachieved decent volume growth. Management lowered FY17revenue guidancein RMB terms to 9-10%, while maintaining non-GAAP profit guidance of 18-20%.This implies sales/non-GAAP profit growth of 8%/18% for 4Q17, taking midpointsof the guidance. For 4Q17, management expects continued increase in sellingexpenses, as well as ASP erosion at similar magnitude as in 3Q17.    Volume growth of key products    In RMB terms, human albumin sales were up 2.4% in 3Q17, driven by5.8% increase in volume due to enhanced production volumes in Guizhou, aswell as 3.2% price erosion given mix change and competition. According tomanagement, the overall supply of albumin was down 6.5% in 3Q17, whiledomestic/import supply was down 10%/3%, and the company's supply was up8% YoY. IVIG sales grew 7.4% driven by 7.9% volume growth, while ex-FX ASPsaw a decline of 0.4% from the offering of price discounts in key markets. Theoverall volume of IVIG decreased by 24% in 3Q17, while the company's supplywas down 17% YoY. Other IG sales were up 10% in 3Q17vs. 29% in 1H17, givena high base in 3Q16. Placenta polypeptide sales jumped 85%, though this isprimarily driven by ASP increase amid swift implementation of two-invoice. Onmarket share, the company occupies 15% and 16% of albumin and IG marketshare, respectively, among domestic players in China.    Margin erosion due to higher selling expenses    GM in 3Q17was slightly down at 67.4%, vs. 68.0% in 3Q16, while OPM erodedsignificantly to 38.2% from 45.9% in 3Q16. Management attributed the marginerosion to adjustment of ex-manufacturing price, as well as increase of sales andmarketing expenses of other hyper immune products. We highlight that tax ratelowered to 14% vs. 17% in 3Q16, while minority interest remained relatively low.    Maintaining price target of USD130; risks    Our price target of USD130is based on 23.5x 2018E forward EPS. We believethe multiple is justified, as the company’s global peers are trading at 27x, with14% EPS growth in 2019E vs. 12% for CBPO in RMB. Key risks include M&Aintegration, price erosion, disruption in plasma collection, cost inflation and delaysin product launches.

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