In the first half of 2011, the company achieved an operating income of 1.232 billion yuan, an increase of 11.22% compared with the same period last year; a total profit of 68 million yuan, a decrease of 25.63% over the same period last year; and a net profit of 56 million yuan, a decrease of 31.04% over the same period last year, achieving EPS0.10 yuan. the decline in the company's performance was mainly due to the decline in the price of antibiotics and the sharp reduction in downstream demand caused by policy factors.

The company's gross profit in the second quarter was 17.30%, down nearly 5% from the same period last year. The main reason is that as the National Development and Reform Commission once again reduced the maximum retail price of some antibiotic drugs and the national bidding for essential and non-essential drugs began to be implemented in various provinces and cities, the prices of the company's related products decreased greatly. At the same time, the prices of raw and auxiliary materials needed by the company, such as soybean oil and starch, have risen rapidly, resulting in a sharp rise in costs.

Among them, the 7-ACA price of the company's semi-synthetic antibiotic raw material drugs has fallen sharply. At present, the 7-ACA price has fallen to 525 yuan, which is lower than the company's cost line. Therefore, the company's semi-synthetic antibiotic raw material drug gross profit margin has dropped from 17% last year to 3.7%. Although the revenue has increased by 17% compared with the same period last year, the profit contribution is limited. At the same time, due to the impact of the antibiotic graded management catalogue, the sales of antibiotic preparations were also significantly affected, with a year-on-year growth of only 4% in the first half of 2011, far below the previous average growth rate of 15%. If the short-term antibiotic policy is not clear, it is expected that downstream demand will be difficult to recover.

Benefiting from the high prosperity of the aquaculture industry, the company's veterinary drug business has grown rapidly, 2011H1 revenue has increased by 34.3% compared with the same period last year, gross profit margin has maintained the average level of the industry in previous years, and the rapid growth of veterinary drug business has made up for the risk of declining performance of the company to a certain extent. We expect strong demand in the entire aquaculture industry this year, and the company's veterinary drugs are expected to benefit from the high prosperity of the industry throughout the year.

It is estimated that the operating income of the company in 2011-13 is 2.734 billion yuan, 2.825 billion yuan and 3.157 billion yuan respectively, an increase of 24.5%, 3.3% and 11.8% respectively over the same period last year. The net profit attributed to the parent company is 120 million yuan, 145 million yuan and 172 million yuan respectively, up-7.24%, 20.74% and 18.42% respectively over the same period last year, and the EPS of the corresponding company is 0.21,0.25,0.30 yuan respectively. Maintain the "hold" rating.