Incident: The company disclosed the interim report on the evening of August 26. In the first half of 2016, it achieved revenue of 427 million yuan, up 114% year on year, net profit attributable to the parent company was 63.99 million yuan, up 102.71% year on year, net profit was deducted from 61.09 million yuan, up 93.85% year on year. The company expects net profit from January to September to be 7762-90.55 million yuan, up 80%-110% from the previous year. At the same time, the company announced an investment of 680 million yuan to build the first and second phases of the modern pharmaceutical formulation project. Comment: 1. Performance is at the upper end of the forecast, in line with expectations, and Xinshengyuan CRO has maintained rapid growth. The company's semi-annual report performance was at the upper limit of the forecast of 568.2-66.29 million, and achieved net profit of 39.79 million yuan per quarter in the second quarter, in line with market expectations. Among them, the subsidiary Shanghai Xingaofeng CRO business (implemented by Xinshengyuan) achieved revenue of 192 million yuan and net profit of 60.34 million yuan, which is already higher than the net profit of 58.88 million yuan in January-July 2015. Xinshengyuan is currently implementing more than 300 projects in service. We expect that Xinshengyuan will contribute no less than 130 million yuan in net profit throughout the year, which is higher than the commitment of 106 million yuan. Currently, Xinshengyuan is also actively engaged in evaluating the consistency of generic drugs. It is progressing smoothly in terms of partners, its own team, customers, etc., and will be able to maintain a growth rate of more than 35% over the next three years. 2. The bidding is progressing smoothly. Combined with the Modern Pharmaceutical Formulation Phase 1 and 2 projects, the parent company's pharmaceutical business profits are expected to increase significantly. Although competition for the company's pharmaceutical products, especially non-antibiotic products, is relatively fierce, most of them are varieties with a large market size. In the first half of 2016, the company participated in the bidding process for several provincial basic drug projects and non-basic drug projects. In total, it won new bids in 9 provinces, and at the same time entered low-priced drug online procurement in 12 provinces. The company's consistency evaluation work began a long time ago, and we expect the company's market share of formulation varieties to increase. The company invested 680 million yuan to build the Modern Pharmaceutical Formulation Phase 1 and 2 project. The construction period is two years. It is expected to achieve revenue of 838 million yuan and net profit of 72.35 million yuan. Profits from the pharmaceutical business are expected to increase significantly. 3. Give a “Highly Recommended” rating. The net profit for 2016-2018 is expected to be 1.52, 2.24, and 310 million dollars, and the three-year compound growth rate of net profit is as high as 80%. Considering the dilution of share capital, the company's 2016-2018 EPS is expected to be 0.57, 0.84, and 1.16 yuan respectively, corresponding to the current stock price PE of 57X, 39X, and 28X, respectively, giving it a “highly recommended” rating. Risk warning: CRO business development falls short of expectations, and formulation tenders fall short of expectations.