Investment highlights: events. On August 23, the company released its semi-annual report. In the first half of the year, the company achieved operating income of 317 million yuan, an increase of 71.30% over the previous year; realized net profit to mother of 568.825 million yuan, and a loss of 22.0865 million yuan in the first half of 2015. 2016Q2's revenue increased by 89.13% year on year, gross margin increased to 47.09%, and net profit increased significantly year on year. In the first half of 2016, the sales price of the company's main product, VB2, increased dramatically over the same period last year. At the same time, the company effectively improved work efficiency, reduced production costs, and enhanced the company's profitability through measures such as optimizing production processes, innovating sales models, and strengthening market management. 1) In terms of process optimization: The company upgraded VB2 and VB6 respectively. First, the company upgraded VB2 biofermentation to increase fermentation units and reduce production costs; second, by changing reaction steps in the VB6 production process, adjusting the feed ratio, and optimizing the feed method, effectively shortening the production cycle and increasing yield; 2) Marketing aspect: strictly implementing the marketing strategy of “price control, volume and price balance”, achieved the best balance between volume and price. Affected by product price increases and process optimization, as of the first half of 2016, the gross margin of the company's products increased to 47.07%, an increase of 22.16 percentage points over the previous year, and an increase of 14.87 percentage points over the first quarter. In 2016 Q2, the company achieved operating income of 160 million yuan, a year-on-year increase of 89.13%, a year-on-month increase of 2.22%, and achieved net profit of 34.84 million yuan, an increase of 42.38% over the previous month. The prices of VB2 and VB6 will maintain an upward trend, and the company's profit situation will continue to improve. On August 22, the VB2 market price was around 260-280 yuan/kg, some manufacturers quoted 300 yuan/kg, and the VB6 market price was about 245-265 yuan/kg. Some manufacturers stopped production and maintenance, and the spot market supply was tight. We expect that the prices of VB2 and VB6 products will continue to rise, and the company's profit situation will continue to improve month-on-month. Centralized distribution of hospital drugs and pharmaceutical-grade VB6 will become new profit growth points for the company. In pharmaceutical marketing, on the one hand, Jikang Company actively introduces market professionals, integrates internal and external management, strengthens performance evaluation, increases the management and control of product prices, reshapes marketing channels, and gradually improves the direct sales business model; on the other hand, it actively promotes centralized drug distribution in local hospitals, strives to create new profit growth points, and strives to achieve a breakthrough within 2016. Xianning Huisheng Pharmaceutical's VB6 production line is preparing for the new GMP certification process. Pharmaceutical-grade VB6 will become a profit growth point for Xianning Huisheng Pharmaceutical. Profit forecasting and investment advice. The competitive pattern of VB2 and VB6 is stable, and product prices are on the rise. Based on the annual average price of VB2 and VB6 at 240 yuan/kg and 260 yuan/kg, the net profit attributable to shareholders of the parent company from 2016 to 2018 is estimated to be 155 million yuan, 198 million yuan, and 238 million yuan, respectively. The corresponding EPS is 0.61 yuan/share, 0.79 yuan/share, and 0.94 yuan/share, respectively. Given the upward trend in product prices, the company was given 38XPE in 2016, corresponding to a target price of 23.18 within 6 months Yuan, maintaining a “buy” rating. Risk warning: risk of large fluctuations in product prices; risk of construction of biological industrial parks falling short of expectations.