Incident: On January 26, Fuan Pharmaceutical announced that it expects to achieve net profit of 620-69 million yuan in 2015, an increase of 35.65%-50.96% over the previous year. The corresponding EPS is 0.22-0.24 yuan, which is lower than our expectations of 0.28 yuan. Comment: Ningbo Tianheng supports performance, and antibiotics are still in a cold winter. The net profit for 2015 is 62-69 million, and we expect total revenue of 600 to 700 million yuan. Among them, Ningbo Tianheng began a consolidated list in May, contributing 3-4 billion yuan in annual revenue and a net profit of about 40 million yuan. Antibiotic varieties such as aztreronam are affected by anti-drug restriction policies and delays in bidding. After experiencing a brief recovery in the first half of '14, it is difficult to maintain growth. There was a sharp year-on-year decline in 2015. We believe that market demand for varieties such as aztreonam, sulbenicillin sodium, nirergoline, and hydrocortisone is rigid, and can remain stable for at least the next three years. The acquisition of Chu Pharmaceutical is in progress. In addition to considering the demand for short-term performance, Zhichu Pharmaceutical, which was acquired this time, places the most importance on Zhichu's biofermentation technology, which is at the leading level in the country and can effectively complement existing technical shortcomings in chemical synthesis. For example, the synthetic raw materials for nyergoline are obtained from biological fermentation. At the same time, through the integration of sales channels such as agents, etc., it is possible to greatly improve the sales level of pharmaceutical varieties and reduce the sales expense ratio. Currently, the restructuring plan is awaiting feedback from the Securities Regulatory Commission. It is expected that it will be approved in a few years, and the merger will begin in April as soon as possible, greatly improving the company's performance. Major specialty drugs have been withdrawn, and the determination for transformation will not be changed. The company's mergers and acquisitions over the past two years revolve around its current main business, guaranteeing performance growth over the next three years. Several major varieties of imatinib, nebivolol hydrochloride, tovaptan, agomelatin, and levoethracetam have all been withdrawn, and preparations are being made to evaluate the consistency of generic drugs in accordance with the latest policy requirements. However, the company is determined to transform and is still seeking new growth poles. The company currently has a market capitalization of only 4.5 billion dollars, plenty of cash, and the 16-year extension layout is worth looking forward to. Maintain a “Recommended” rating. Without considering the impact of Tianheng's merger, the 2015-2017 EPS is expected to be 0.24 yuan, 0.33 yuan, and 0.41 yuan, and the price-earnings ratio corresponding to the current stock price of 16.18 yuan is 67 times, 49 times, and 39 times, respectively. The 16-year EPS after dilution was 0.49 yuan, and the corresponding price-earnings ratio was only 33 times. Considering the performance improvement and transformation expectations brought about by the merger, the “recommended” rating was maintained. Risk warning: 1. The tender falls short of expectations; 2. The risk of new drug approval; 3. The risk of mergers and acquisitions.