Guangji Pharmaceutical is the world's largest vitamin B2 manufacturer, with a total production capacity of 4,800 tons/year, accounting for nearly 50% of global production capacity. As vitamin B2 prices rebounded from the bottom of 2015 Q2, the company's performance improved significantly: in 2015, the company achieved operating income of 560 million yuan, an increase of 15.3% over the previous year, and net profit attributable to shareholders of the parent company (hereinafter referred to as “net profit”) was 20.92 million yuan (loss of 219 million yuan in 2014), turning a loss into a profit. In the first half of 2016, the company achieved operating income of 317 million yuan, an increase of 71.3% over the previous year, and net profit of 56.88 million yuan (loss of 22.09 million yuan in the same period last year). The vitamin B2 industry is in an upward boom cycle. The vitamin B2 industry's boom has increased steadily since the second half of 2015. The degree of industry collaboration has increased significantly. Product prices have risen from the bottom of 125 yuan/kg to the current 260-280 yuan/kg. The peak downstream demand season is approaching. Mainstream companies are showing strong willingness to raise prices, and it is expected that there will still be great potential for growth in the future. However, a significant drop in corn prices will reduce the company's production costs and the sensitivity of downstream feed companies to vitamin price increases, and the company's profitability is expected to rise further in the third quarter. The long-term focus is on the transfer of overseas production capacity and development of differentiated products, and the development prospects are good. Changtou Group took over. Changtou Group, which is currently the majority shareholder of the state-owned enterprise reform reserve company, was established in November 2010. It is a wholly state-owned company established with the approval of the Hubei Provincial People's Government, and has strong comprehensive strength. Driven by Changtou Group, the company has made positive changes in management and marketing, and its operating efficiency has improved markedly. In the future, Changtou Group is expected to use Guangji Pharmaceutical as an operating platform to vigorously develop the biomedical industry and build a biomedical industry chain, and there are certain expectations for asset integration. For the first time, we expect the company's EPS to be 0.67, 1.08, and 1.25 yuan respectively in 2016-2018. Based on sales volume of 2,500 tons/year, the price of vitamin B2 increases by 10 yuan/kg (or 10,000 yuan/ton). Assuming that the cost and tax rate remain unchanged, the company's EPS will increase by about 0.06 yuan. The company's performance is flexible, and there are certain expectations for state-owned enterprise reform, combined with the majority shareholders' secondary market holdings increase price (17.84-19.69 yuan). The current stock price has a good risk-return ratio Referring to the valuation situation of comparable companies in the vitamin industry, we think it is possible to give the company 22-24 times PE in 2017, with a corresponding target price of 23.8-25.9 yuan. For the first time, coverage can be given an “increase in weight” rating. Risk warning: There is a risk that product price increases will not progress as expected, and there is a risk that the prices of raw materials such as corn will fluctuate greatly.