s.y...@favorit.com.cn

Because of lack of interest in NPD from professional analyst, I
thought I will submit the first analysis of NPD Q1 quarterly report :)

The revenue growth is disappointing. what we are seeing is that NPD
opened 16 new stores in the first quarter. This is a small number
compared to previous year but it is also indicating that the
management is moving away from their previous strategy. This is also
shown in the revenue growth of 12.1% instead of in the 20%-range. But
I think the new strategy is a good thing because there is emphasize on
the quality of stores and location. The revenue growth will be slower
but the earnings as part of revenue will improve because. The per-
store performance should improve over time. Anyway, the number of
newly opened stores in the first quarter is very meager, even there is
a shift in strategy. I expect the number of newly opened stores to
grow in the 2nd quarter and onwards in the future. As the report
indicates, there is already talks ongoing with the local governments
of Hubei and Jilin Province. There is a lot of room for NPD to grow.
Either by growing organically or by buying up smaller rivals. But this
time with more emphasize on quality of the stores.

First quarter revenue contribution from prescription drugs was 22.1%
This is much better than the 19.7% in the previous quarter. I think
that we already see some effect of the health care reforms which is
shifting the drug distribution from hospitals to retail pharmacy. This
is a good development for NPD and for the consumers.

The company's margin is still improving and the balance and cashflow
are very healthy.

The earning of RMB 30 mln is a disappointment. In Q1 2008 this was 55
mln. But this can be explained by RMB 12 mln less interest income and
increased sales and marketing costs of 13 mln. This is very
reasonable. What is important is that the gross margin, which is
48.2%, is still very strong.

A positive note in the report is the expression of the management that
'We believe the worst is already behind us and look forward to
recovery in the balance of the year'