Key investment events: The company's operating income and net profit in 2016 were 310 million yuan and 62 million yuan, respectively, with year-on-year growth rates of 1.3% and -35.8% respectively; 2016Q4 operating income and non-net profit were about 86 million yuan and 6.8 million yuan respectively, with year-on-year growth rates of 4.7% and -66% respectively; Agandin and Heganding were clearly affected by the industry, and sales revenue both declined. The company is the only company in China that also owns three mainstream anti-hepatitis B small molecule drugs, Engandin, and Heganding. In 2016, the operating income and non-net profit deducted were 3.1 million yuan and 62 million yuan respectively, with year-on-year growth rates of 1.3% and -35.8% respectively; net profit after deducting non-net profit declined markedly, mainly because Agandin and Heganding were affected by price cuts and competitive varieties, and sales volume and sales prices declined markedly. In 2016, the revenue of the company's three main products, Enganding, and Heganding, accounted for 99.9% of total revenue; due to changes in domestic hepatitis B treatment guidelines, Engandin became first-line treatment drugs for hepatitis B, while Agandin and Hegandin were no longer first-line drugs. As a result, sales revenue of Forgandine and Heganding declined by varying degrees; in 2016, sales revenue of Agandin was 62.37 million yuan, down 32.9% from the previous year; while Engandin's sales revenue increased steadily, compared with sales revenue of 2.2 billion yuan, compared to the previous year. An increase of 20.2%. Affected by price cuts in tenders, the gross margins of both Forrest Gandin and Heganding declined by about 4 percentage points, while Engandin remained stable, falling slightly by 0.2 percentage points. Actively deploying new varieties with liver disease treatment as the core, the launch of tenofovir may greatly improve performance. The company is actively developing new drugs for liver disease based on liver disease treatment, and has established 4 new Class 1 drugs. In 2016, the company established Guangshengtang's “Curing Hepatitis B Peak Program” and an innovative drug development plan to treat fatty liver disease and liver cancer, and collaborated with PharmacomingKant to develop 2 new class 1 drugs for hepatitis B, 1 class 1 innovative drug for fatty liver disease, and 1 class 1 anti-liver cancer innovative drug. As a result, the company invested 68.19 million yuan in R&D in 2016, accounting for 21.8% of total revenue, an increase of 159.7% over the previous year. Tenofovir, the core product being developed by the company, has entered the final critical stage of production reporting. This variety is a new first-line type for hepatitis B treatment. In the future, the domestic market space will reach 5 billion yuan. In 2017, the company will likely be approved for the first trial of hepatitis B indications. In the future, peak sales can reach 1 billion yuan, contributing 350 million yuan in performance. If tenofovir is successfully approved, the declining trend in the company's performance will be greatly improved, and the company has the potential to become a leading drug for liver disease in China. Profit forecasts and investment advice. The 2017-2019 EPS is expected to be 0.61 yuan, 0.83 yuan, and 1.22 yuan, respectively, and the corresponding price-earnings ratios are 84 times, 62 times, and 42 times, respectively. The company's current performance is under high pressure due to changes in hepatitis B medication guidelines, lower drug prices, and increased costs during the period. However, with the release of Engandin and the approval of tenofovir, the company's performance may improve. Be optimistic about the company's development prospects for a long time and maintain a “buy” rating. Risk warning: The risk of falling drug prices, and the progress of new product launches may fall short of expectations.