Main point 1. Business conditions improved to a significant increase in performance in 2010. Fengyuan Pharmaceutical specializes in major infusions, chemical preparations and pharmaceutical businesses, and is a leading pharmaceutical company in Anhui Province. According to public information, Fengyuan Pharmaceutical's main business revenue from January to September 2010 was 812 million yuan, an increase of 15%. The company announced that in 2010, the company could achieve net profit of 40 million yuan to 50 million yuan, an increase of 74%-117% over the previous year. The main reason for the sharp increase in the company's performance is that costs and expenses are well controlled, and the return on investment has increased dramatically. 2. Stable growth is expected in 2011. Fengyuan Pharmaceutical's large infusion has always been the most important industry in the company's pharmaceutical industry. Although other pharmaceutical businesses grew rapidly in 2010 and their share increased, we expect that large infusions still accounted for about 70% of industrial sales revenue in 2010. Due to the loss of the glass bottle bid in Anhui this time, we expect the company to lose the Anhui market, which accounts for 20% of the major infusion market, in 2011, which will affect the company's sales and profit growth in 2011. However, since 2009, the company has implemented marketing reforms and increased efforts to promote new products, and since 2010, Bilin and others have achieved good results. At the same time, we expect that the company will increase the launch of high-profit products such as therapeutic and nutritional infusion varieties. We believe that we can still achieve steady growth in 2011. 3. Implantable anticancer drugs may become a turning point in the company's take-off. In July 2010, a joint venture agreement was signed with Anhui Zhongren Technology to establish Fengyuan Zhongren Pharmaceutical to develop and produce implantable methotrexate and implantable cisplatin. Fengyuan Pharmaceutical holds 60% of the shares in the joint venture, and Zhongren Technology accounts for 40% of the shares in the joint venture. However, the agreement stipulates that implantable cisplatin will be listed before the end of September 2012, and Fengyuan Pharmaceutical's share of shares will increase by 2% for every quarter postponed; at the same time, the joint venture's net profit after tax from April 2013 to March 2016 was 75 million yuan. If it is not achieved, the shares will be further transferred to Fengyuan Pharmaceutical until 80% as stipulated in the agreement. We believe that the implants cisplatin and methotrexate have a market size of several billion dollars. Once listed, they will have a great impact on the company's performance, and the company's future take-off is worth looking forward to. 4. Investment advice: recommendations. It is predicted that the company's EPS for 2010, 2011, and 2012 will be 0.18 yuan, 0.24 yuan, and 0.33 yuan respectively, corresponding to PE of 55 times, 39 times, and 30 times. The current valuation is slightly higher. However, considering the multi-billion market prospects of the joint venture Fengyuan Zhongren Technology implants and anti-tumor drugs and is in line with the 12th Five-Year Plan, it is worth looking forward to the company's take-off in the future, so we maintain our recommendation rating.