Incident: On October 29, 2016, the company announced its third quarter results announcement, stating that operating income for the first three quarters was 687 million yuan, up 0.34% year on year; net profit was 469.11 million yuan, up 232.77% year on year; net profit after deduction of 355.63 million yuan, up 249.6% year on year; basic earnings per share was 0.06 yuan, up 197.94% year on year. Single-quarter revenue for the third quarter was 239.8 million yuan, down 1.477% year on year, net profit was 14.59 million, up 381.4% year on year, and net profit after deducting non-return net profit of 17.857 million, up 814.3% year on year. Comment: The company's performance in the third quarter continued to pick up, and the performance of specialty drugs and proprietary Chinese medicines and tablets was impressive. The company achieved sales revenue of 246 million yuan for specialty drugs in the first three quarters, an increase of 64.59% over the previous year. The main reason is that the company is increasing the marketing of specialty drugs, and the market share of key products is gradually expanding. Proprietary Chinese medicines and tablets achieved sales revenue of 78.714 million yuan, an increase of 44.81% over the previous year. This part of the performance was mainly due to the increase in the company's sales of American ginseng tablets. The anti-infective sector achieved sales revenue of 246 million yuan, a year-on-year decline of 9.4%; the large infusion sector achieved sales revenue of 78.826 million yuan, a year-on-year decline of 37.63%. The company's two business segments were mainly due to “infusion restrictions” and “resistance restrictions” at the policy level. Overall, the company's main business revenue has maintained a certain growth rate. The specialty specialty and proprietary Chinese medicines and tablets sectors are growing beautifully, the gross margin of all business segments is stable, and performance continues to pick up. The specialty drugs limexide, cannalin (nanocarbon), and urtilins continued to increase in new standards. The American ginseng business helped increase performance. Lemexil was the first generic drug launched by the company in 2014, and the original research product was AstraZeneca's Naixin. From September to October 2016, Laimesu added 3 new bids, of which Heilongjiang was the new winning province. Up to now, the product has won bids in 8 provinces this year (only 2 in 2015). Cannalin (nanocarbon suspension injection) and Ultilinth are the company's exclusive products. Among them, two new bids were added for cannalin in September, four new bids were added for Ultilins, and Heilongjiang, the province that won the bid. The above three products are all major products of the company, and they are all currently in the release period. On January 20, the company signed a cooperation agreement with Hengfa Ginseng Holdings Co., Ltd., the largest first-level Western ginseng wholesaler in Hong Kong. Hengfa Ginseng will provide the company with an estimated quantity of 300 to 400 tons of Canadian American ginseng. The two sides jointly develop the domestic market. Based on the company's performance in the proprietary Chinese medicine and tablet sector in the third quarter, the agreement is gradually being implemented; in line with the current government's many documents promoting the health and prevention of diseases of traditional Chinese medicine, the company's American ginseng business has become another guarantee for performance growth. Profit forecast and valuation: Considering the company's initial release of specialty pharmaceutical products, rapid performance growth and overseas expansion, we estimate that the company's EPS for 16-18 was 0.09, 0.17, and 0.3 yuan, respectively, corresponding to 98, 50, and 30 times PE. The target price is 12 yuan, maintaining the “Highly Recommended” rating. Risk warning: Product release and expansion fall short of expectations; changes in national policy.