Different from the market understanding: Compared with mainstream CRO companies, Xinshengyuan's current business model is quite special. The company's pre-clinical CRO does not conduct experiments entirely on its own, but actually acts as a project manager. Generally, they do the pharmaceutical research part themselves, and outsource the rest to other companies. Some investors in the market believe that Xinshengyuan's business capabilities are weaker than other CRO listed companies and do not have their own core competitiveness, so it is difficult to receive quality orders in generic drug consistency evaluations that are in full swing. Furthermore, some investors are worried that Xinshengyuan's past performance is too dependent on government park projects, and future growth may be weak. We believe: 1. Xinshengyuan is a CRO enterprise with outstanding core competitiveness with high barriers, high profits, and light assets. The government's support for Xinshengyuan, good business positioning, outstanding ability to take orders, and professional business ability create high competitive barriers for the company. These are also reflected in the company's statements. Compared with peers, Xinshengyuan shows high ROE and light assets. 2. Xinshengyuan is expected to receive high-quality orders in generic drug consistency evaluations. New drug development before Xinshengyuan is highly correlated with consistency evaluation. The company hopes to seize the industry opportunity of consistency evaluation, increase investment in team building and resource allocation, solidify various businesses, and open up the entire CRO industry chain. The future clinical business will increase from 20% to 50%. Furthermore, hospital clinical resources are the scarcest part of the overall consistency evaluation, and this is exactly where the new source advantage lies. The company is expected to receive high-quality orders in the consistency evaluation and establish continuous cooperative relationships with large pharmaceutical companies. 3. We judge that the profit points of new sources will be more diverse in the future, and they will be able to maintain rapid growth of more than 35% in the next three years. First, as mentioned earlier, the industry opportunities brought about by drug consistency evaluations allow the company to receive high-quality orders; second, the company's overseas business expansion has gradually entered a harvest period; third, the fixed increase funding project, the Wuhan Optics Valley Biocity City project has brought new profit points. Profit forecast and valuation: The company's revenue for 2016 to 2018 is estimated to be 88%, 24%, and 24.7% respectively, with net profit of 1.69, 2.41, and 328 million yuan respectively, with growth rates of 204%, 43%, and 36%, respectively. The three-year compound net profit growth rate is 80%. Without considering share capital dilution, the company's EPS for 2016 to 2018 is estimated to be 0.83, 1.18, and 1.61 yuan, respectively, corresponding to the current PE stock price, which is 35X, 27X, and 21X, respectively. Considering the dilution of share capital, the company's EPS for 2016 to 2018 is expected to be 0.63, 0.90, and 1.22 yuan, respectively, corresponding to the current stock price PE, which is 46X, 32X, and 24X, respectively. We believe that the market has not fully understood Xinshengyuan's business model, nor is it fully aware of some positive changes in Xinshengyuan's business model. Xinshengyuan has not only greatly increased the company's profits, but at the same time, the company has transformed from a more traditional chemical formulation company to a CRO medical service company. It is highly certain that future growth will be high and should obtain a valuation level comparable to that of the industry. The company is expected to double hit Davis and give it a “highly recommended” rating. Risk warning: CRO business expansion falls short of expectations.