Event: the company's operating income and net profit after deduction in the first half of 2015 were 88.04 million yuan and 16.24 million yuan respectively, an increase of 25.8% and-21.6% respectively over the same period last year. 2015Q2's operating income and net profit after deduction were 60.62 million yuan and 14.41 million yuan respectively, an increase of 30% and-17.5% respectively over the same period last year.

The performance growth in the first half of the year is in line with expectations, and the performance of core products is stable. The growth rate of operating income in the first half of 2015 is about 26%, which is in line with market expectations. The main reasons are as follows: 1) with the further expansion of the anti-tumor market, the new sales of the company's core product thymus method continues to grow; combined with the data of the sample hospital, we judge that the new sales volume of thymus method is more than 50 million yuan. Maintain a high market share. 2) the company actively expanded the export business of polypeptide products, and the export volume of APIs increased by 33.8% during the reporting period; 3) the sales of other products represented by Carnitine were good, up 53.2% from the same period last year. 4) the company's sales in all regions have increased by a large margin, and due to the positive influence of the bidding work, the company has increased greatly in East China, Central China and Southwest China, with an increase of more than 55% in the Southwest region. The company's operating costs increased by 41% during the first half of the year, mainly due to the increase in sales costs caused by the increase in sales.

Accelerate the development of endogenesis and extension, and be optimistic about the future performance of the company. 1) during the reporting period, the implementation of equity incentives and the acquisition of 46% equity in Hangzhou by 250 million of bank loans have a certain negative impact on the short-term performance of the company. Among them, the acquisition of Australia and Asia increased financial pressure and management expenses in the short term, which increased by 99.6% and 265.6% respectively compared with the same period last year. In the long run, the company will benefit from the purchase of shares in Hangzhou Australia Asia and enter the contract processing outsourcing (CMO) business. Hangzhou Australia Asia is the largest freeze-dried powder needle processing outsourcing enterprise in China, with operating income and net profit of 229 million yuan and 103 million yuan respectively in 2014, which is 142% and 170% of the company's in the same period. 2) the company has accelerated the construction of Ningbo Shuangcheng antineoplastic drug and oral solid preparation base, made every effort to increase the extension of antineoplastic drug industry, and focused on the development of anti-tumor industry. Ningbo antineoplastic drug base will be developed into a production center with an annual output value of more than 1 billion yuan. 3) the company plans to acquire 74.9% shares of Lyomark Pharma GmbH and Bendalis GmbH of Germany with 70-200 million yuan, enhance the strength of generics and patented tumor drugs, and contribute 60 million yuan to participate in the operation of M & A funds to further strengthen the integration of the value chain and the expansion of the industrial chain, with an obvious trend of extension expansion.

Profit forecast and rating: from the analysis of the current market competitiveness of the company's products, we assume that the growth rate of the main polypeptide products is 20% and that of other products is 15%. Since the purchase of 46% equity in Australia and Asia was completed in May this year, the acquisition of the remaining shares of Australia and Asia will not be considered for the time being, and only the income of Australia and Asia will be included in the income of long-term equity investment. We estimate that the earnings per share from 2015 to 2017 will be 0.20,0.30,0.36 yuan. We believe that the new market competitiveness of the company's core product thymus method is strong, and the endogenous and extension activities will affect the net profit in the short term, but it will significantly improve the company's future profitability and maintain its "buy" rating.

Risk hint: the progress and effect of epitaxial acquisition may be lower than expected.