Incident: The company achieved revenue of 590 million yuan in the first three quarters, +98.6% year on year; net profit to mother of 85.53 million yuan, +98.4% year on year; net profit after deduction of 81.4 million yuan, 88.5% year on year; net operating cash flow of 37.65 million yuan, or -221% year on year. At the same time, the company predicts a net profit change range of 105 million to 128 million yuan in 2016, +90% to 130% year-on-year. The parent company's performance fell short of expectations, and CRO continued its rapid growth trend. The company achieved revenue of 590 million yuan and net profit of 855.3 billion yuan in the first three quarters. Excluding the parent company's statements, it can be estimated that the company's CRO business achieved revenue of about 300 million yuan in the first three quarters, with a net profit contribution of about 80 million yuan, and completed the annual performance promise of about 75%. Considering that the CRO business generally accounted for a relatively high proportion in the fourth quarter, that is, the CRO business continued to grow rapidly, and it still exceeds performance promises throughout the year. Looking at the parent company, it is expected to achieve formulation revenue of less than 300 million yuan in the first three quarters, contributing several million to net profit, that is, the performance of the formulation business is lower than expected. The main reason is due to two aspects: 1) the company actively adjusted sales methods, and the revenue from low-margin OTC channels showed a downward trend, but the company's overall revenue quality has improved; 2) financial expenses are still dragging down performance. Considering that the capital raised is in place and that the product has won bids in several provinces, we believe that the parent company's performance is expected to recover in 2017. CRO has become the company's main strategic business, clearly benefiting from the new drug policy. The CRO industry is at the core of the pharmaceutical R&D industry chain and is indispensable for the development of new drugs. The domestic CRO industry is expected to expand rapidly, benefiting from the speed of consistency evaluation and approval of new drugs. The company strategically entered the CRO industry at the end of 2015. Shanghai Xingaofeng, which is wholly-owned, is a CRO enterprise providing research services covering the entire industry chain covering pre-clinical research and clinical research. The company has accumulated services for more than 550 projects, of which more than 450 are innovative drug CRO projects. The interim report shows that a total of about 330 projects have been implemented, and the company has become one of the industry leaders in the field of innovative drug CRO services. Considering that Shanghai Xingaofeng has passed the GRDP management system, planned, participated in, and formed GLP, GCP, and GMP industry alliances, and is actively preparing a consistency evaluation technology platform and a medical research service and precision medicine technology service platform, which is a clear benefit target for new drug policies such as generic drug consistency evaluation and marketing licensor systems. Profit forecasting and investment advice. Considering that the growth rate of the formulation business was lower than expected, we lowered our profit forecast. It is estimated that EPS in 2016-2018 will be 0.45 yuan, 0.68 yuan, and 0.87 yuan, respectively, corresponding to the current PE stock price, which is 72 times, 48 times, and 37 times, respectively. Considering that the parent company's performance is expected to recover, the new peak CRO business is highly expandable, and the company may have extended development expectations, we believe that the company's performance and valuation are expected to increase simultaneously and maintain a “buy” rating. Risk warning: CRO business expansion falls short of expectations, formulation or risk of price reduction, delay or fall short of expectations.