Monthly data tracker: October 2017.    Recent data suggest that: 1) drug consumption grew 14.6% YoY in September vs.    12.1% in YTD8m17; 2) inpatient and outpatient traffic increased 5.5% and 1.9%,respectively, in 1H17; 3) government spending on healthcare grew 16% YoY inYTD9m2017 vs. 10% in 2016; 4) vitamin C prices remained high; 5) 6-APA priceswere flat while 7-ACA prices increased 8% MoM in October; 6) TCM raw materialprices were mixed; and 7) corn prices increased to RMB1,720/ton in October.    Government spending, drug consumption, patient traffic and insurance.    Growth in government spending on healthcare rose 10% YoY in September2017 to RMB152bn, while YTD8m17 growth reached 17% vs. 10% YoY in 2016.    Meanwhile, growth in drug consumption accelerated to 14.6% YoY in September2017; YTD8m17 growth was 12.1% vs. 12.0% and 14.2% YoY in 2016 and2015, respectively. Inpatient traffic continued to outpace outpatient flow, with theformer up 5.5% YoY and the latter rising 1.9% in 1H17. In August, inflow andoutflow of urban basic medical insurance climbed 17% and 30% YoY respectively.    For commercial insurance, the inflow of healthcare insurance declined 13% YoY inAugust 2017, while the outflow of healthcare insurance continued to grow at 25%YoY. However, on a YTD basis, inflow grew 3% vs. 26% for outflow in YTD8m17.    Vitamin C prices remained high; 6-APA price unchanged while 7-ACA pricewent up.    Domestic vitamin C prices remained high with an ASP of RMB70/kg in October2017, while imported vitamin C prices were up 4% MoM to USD6.6/kg inSeptember. The price of 6-APA was stable at around RMB210/kg in October 2017.    The ASP of 7-ACA was at RMB390/kg, up 8% MoM. We remind investors thatmain manufacturers resumed production of 7-ACA in September 2015 at a 16%price cut from RMB630/kg in June 2015.    TCM raw material prices were mixed.    The TCM raw material price index turned from recent uptrend and fell 0.32% MoMto 1,291 in Oct 2017. The ASP of honeysuckle increased 3% while the price ofindigowoad root decreased 5% MoM in Oct 2017. Honeysuckle and indigowoadare the main ingredients in Shineway’s flagship product, Qing Kai Ling. Both theprices of ophiopogon root and radix ginseng increased in October, with 4% and10% MoM growth respectively. These are the main ingredients in Shen Mai.

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