Incident: The company released its three-quarter report on the evening of October 18. From January to September, it achieved operating income of 554 million yuan, +47.53% year over year; net profit to mother of 125 million yuan, +735.98% year over year; net profit after deduction of 127 million yuan, +776.20% year over year. The third quarter achieved net profit of 69.57 million yuan after deduction in a single quarter, +2237.97% over the same period last year. Opinion: Results for the first and third quarters exceeded expectations. According to data disclosed by the company, the company achieved revenue of 237 million yuan in Q3 (Q1 revenue of 157 million yuan, Q2 revenue of 160 million yuan), net profit of 67.93 million yuan (Q1 net profit of 24.47 million yuan, Q2 net profit of 34.84 million yuan), which surpassed market expectations. Judging from the company's business data for each quarter in 2015, the company's revenue was clearly seasonal. The company's performance accelerated markedly in the second half of the year. The main reasons are as follows: 1) Strong prices for leading products VB2 and VB6 provide a strong guarantee for significant improvement in annual performance. The prices of VB2 and VB6 began a new round of upward cycle from the end of July '15 to the second half of July. Among them, VB2 stabilized in the 260-280 yuan/kg range after March '16, and the prices for most of the time were in the 260-280 yuan/6B6 range. from It rose as high as 140 yuan/kg to 310 yuan/kg. In April of this year, due to a sharp drop in prices from Tianxin Pharmaceutical, a major domestic VB6 manufacturer, there was a brief price adjustment, and the price gradually rebounded steadily at the end of June and stabilized at the level of 250 yuan/kg after August. We believe that subsequent prices for the two major products will continue to be strong and there is still room for price increases. In particular, VB2 companies with strong pricing power will continue to implement the strategy of controlling price increases. Considering that downstream demand will enter the traditional peak procurement season in the fourth quarter (most orders will be signed in November and December), and the supply-side pattern will improve after environmental protection becomes stricter, the main competitors are clearly willing to raise prices. Taken together, we believe that VB2 prices will remain strong for some time to come, and there is room and momentum for further increase. 2) The price of corn, which accounts for 70% of production costs on the cost side, will further increase the company's gross margin, and the main raw material for producing vitamin B2 is corn starch, which accounts for about 70% of production costs. Due to the implementation of temporary corn storage policies year after year, China's corn planting area continues to expand, and stocks are rising year by year. Currently, production capacity is being removed from inventory. As corn prices gradually become marketable after the storage policy reform, the price of corn will enter a downward channel under the relationship between market supply and demand, directly benefiting downstream manufacturers that use it as the main raw material. 2. Long-term investors, with strong expectations for state-owned enterprise reform. Changtou Group is a wholly state-owned company established with the approval of the Hubei Provincial People's Government. Established in 2010, it has strong strength and many assets. After joining the company in 2014, Changtou promised to correct the company's profit in 2015-2017. Judging from the actual operating situation, the company underwent positive changes in marketing and internal management after Changinvest, and operating efficiency improved significantly. In the current context of the acceleration of state-owned enterprise reform in Hubei, Guangji Pharmaceutical, as the only listed company under Changtou, is expected to become Changtou's operating platform to vigorously develop the pharmaceutical and biological industry. In the future, the company may also create a second main business based on industry integration to reduce operating risks. Conclusion: Without considering extension and asset injection, we expect the company's net profit to be 186 million yuan, 212 million yuan, and 230 million yuan respectively, and EPS of 0.74, 0.84, and 0.92 yuan, respectively, and corresponding PE of 29X, 25X, and 23X respectively. As the world's largest VB2 manufacturer, the company has a production capacity of 4,800 tons (accounting for nearly 50% of global production capacity), and has strong pricing power for VB2 products. Considering that downstream demand will enter the traditional peak procurement season in the fourth quarter (most orders will be signed in November and December), and the supply-side pattern will improve after environmental protection becomes stricter, the main competitors are clearly willing to raise prices. Taken together, we believe that VB2 prices will remain strong for some time to come, and there is room and momentum for further increase; in addition, the price of corn, which accounts for 70% of production costs on the cost side, will enter a downward channel to support The company's gross margin increased further. As a company we continue to follow, Guangji has been closely monitoring its latest changes. At the present time, considering the company's significant acceleration in performance and strong expectations for state-owned enterprise reform, it has been covered for the first time and given a “recommended” rating.