Incident: On the evening of August 26, the company disclosed the interim report. In the first half of 2016, it achieved revenue of 427 million yuan, up 114% year on year. Net profit attributable to the parent company was 63.99 million yuan, up 102.71% year on year, after deducting non-net profit of 61.09 million, up 93.85% year on year. The company expects net profit from January to September to be 7762-90.55 million yuan, an increase of 80% to 110% over the same period last year. At the same time, the company announced an investment of 680 million yuan to build modern pharmaceutical phase I and phase II projects. Comment: 1. Performance is at the upper end of the forecast, in line with expectations, and Xinshengyuan CRO maintained rapid growth. The company's semi-annual report performance was at the forecast limit of 5682-66.29 million, and achieved net profit of 39.79 million yuan in a single quarter in the second quarter, which was in line with market expectations. Among them, the subsidiary Shanghai Xingaofeng CRO business (implementing entity is Xinshengyuan) achieved revenue of 192 million yuan and net profit of 60.34 million yuan, which is already higher than the net profit of 58.88 million yuan from January to July 2015. Xinshengyuan is currently implementing more than 300 projects in service. We expect Xinshengyuan to contribute no less than 130 million in net profit for the whole year, which is higher than the promise of 106 million yuan. Xinshengyuan is also currently actively deploying generic drug consistency evaluations. It is progressing smoothly in terms of partners, own teams, customers, etc., and will be able to maintain a growth rate of more than 35% over the next three years. 2. The tender is progressing smoothly. Combined with the Modern Pharmaceutical Formulation Phase 1 and 2 project, the parent company's pharmaceutical business profit is expected to increase significantly. Although competition is relatively fierce, the company's formulation varieties, especially non-antibiotics, are mostly varieties with a large market size. In the first half of 2016, the company participated in the bidding process for several provincial basic drug projects and non-basic drug projects. In total, it won bids in 9 provinces, and also entered the online procurement of low-cost drugs in 12 provinces. The company's consistency evaluation work began early, and we expect the company's market share of formulation varieties to increase. The company invested 680 million yuan in the Modern Pharmaceutical Formulation Phase 1 and 2 project. The construction period is two years. It is expected to achieve revenue of 838 million yuan and net profit of 72.35 million yuan. The profit of the formulation business is expected to increase significantly. 3. Give a “Highly Recommended” rating. Net profit for 2016-2018 is expected to be 1.52, 2.24, and 310 million, with a three-year compound net profit growth rate of 80%. Considering the dilution of share capital, the company's EPS for 2016 to 2018 is expected to be 0.57, 0.84, and 1.16 yuan respectively. Corresponding to the current share price PE is 57X, 39X, and 28X, respectively, giving it a “highly recommended” rating. Risk warning: CRO's business development fell short of expectations, and formulation tenders fell short of expectations.