The company is one of the four major production bases of antibiotics; in fact, it is a first-tier biopharmaceutical company. As the earliest large-scale antibiotic manufacturer, the company mainly obtains antibiotic products through microbial fermentation, especially the penicillin industry, almost all of which are obtained through microbial fermentation. After the company's 7-ACA enzyme method was implemented in October '09, the cephalosporin industry chain also basically achieved biological production, which not only drastically reduced costs, but also reduced environmental pollution. The industry complies with the requirements of the national biological industry planning and the future positioning of the company's own biomedical industry. The fourth quarter was the peak season for pharmaceutical sales, and the company's annual pharmaceutical sales increased by more than 25% without worry. The antibiotic industry is seasonal. Generally, the first quarter is the fourth quarter is the peak demand season, and the second and third quarters are the off-season. There are 21 types of the company's pharmaceutical business that have entered the medical insurance catalogue, benefiting from the expansion of medical insurance and the smooth implementation of the current bidding process. It is expected that the fourth quarter will increase by more than 30% year-on-year, and the annual increase of more than 25% is worry-free. 7-ACA prices are expected to rise again in the fourth quarter, with a reasonable range of 800-850 yuan/kg. Downstream formulation demand is driving the increase in demand for the API 7-ACA, and is also affected by the relocation of the Wichida plant in Shanxi. Recently, 7-ACA prices have once again exceeded 800 yuan/kg after experiencing a slump in August. We expect the reasonable price range for the fourth quarter to be 800-850 yuan/kg, and the gross margin of the company's annual 7-ACA products will exceed 30%; the 7-ACA expansion project is expected to be put into production ahead of schedule until September. The company originally planned to increase 7-ACA production capacity to 70-80 tons/month in the fourth quarter, but based on the current market supply and demand situation and the mentality of the company's leadership, we expect the 7-ACA expansion project to be put into operation in September. The 7-ACA production capacity will exceed 640 tons in '10, more than 40 tons over the original forecast, and is expected to increase revenue by 30 million yuan. At the same time, production capacity will reach 900 tons in 11 years after the expansion of production. If the average sales price is 800 yuan/kg, revenue can reach 540 million yuan, and profit will increase by more than 50%. The industrial price of penicillin remained above 70 yuan/BOU. According to health network monitoring, the price of penicillin salt was slightly lowered to 70 yuan/BOU in September 2010. Affected by domestic and foreign market demand, there will be slight changes in the future, but the price is expected to remain above 70 yuan/BOU in the fourth quarter. Maintain Lukang Pharmaceutical's profit forecast. The net profit of Lu Kang Pharmaceutical is estimated to be 182 million yuan, 237 million yuan and 306 million yuan respectively in 2010-12, corresponding to EPS of 0.31 yuan, 0.41 yuan and 0.53 yuan, respectively, up 383.95%, 30.18% and 29.10% from the previous year. In line with previous predictions. In view of the boom in the antibiotic industry in the fourth quarter, we believe that Lukang Pharmaceutical is the primary target for the API sector in the fourth quarter of 2010, with a target range of 10.25-12.30 yuan. The 7-ACA price recovery once again validates our reasonable judgment that the average price for the whole year is 850 yuan/kg. We believe that 7-ACA is the biggest highlight of the company this year and next two years, but this is only the beginning of a reversal in the company's performance. With the continuous stabilization of the company's leading position in veterinary drugs and the implementation of investment programs, future performance is expected to accelerate. We believe that the company is currently the best investment target in the API sector, maintaining a “buy” investment rating