In 2012, the company achieved operating income of 362 million yuan, up 16.32% from the same period last year; operating profit of 25.1109 million yuan, down 38.69% from the same period last year; net profit belonging to the owner of the parent company was 25.801 million yuan, down 27% from the same period last year; and basic earnings per share was 0.19 yuan. The distribution plan is 1.00 yuan (including tax) for every 10 shares.

Acquire and increase operating income and comprehensive gross profit margin. During the reporting period, the company's operating income grew relatively fast. The continuous development of the "restricted resistance" policy led to a 16.73% drop in the company's anti-infective drug revenue compared with the same period last year; however, due to the company's acquisition of a 60% stake in Hailisheng Pharmaceutical, the new consolidated business increased its operating income by 139 million yuan, resulting in a 16.32% year-on-year increase in operating income. Excluding Hailisheng pharmaceutical revenue, the company's operating income will drop by 28.41% compared with the same period last year. As the marketing strategy of Hailisheng Pharmaceutical is different from that of the company, the gross profit margin of its products is generally high, resulting in a year-on-year increase of 13.46 percentage points to 60.19%.

Sell backward production capacity and acquire and increase net profit. The amalgamation of Haili Pharmaceutical Industry and the sharp decline of the original business income have increased the company's expense rate, the sales expense rate and the management expense rate increased by 13.53% and 6.81% respectively compared with the same period last year, and the expense rate increased by 19.20% during the period. The above led to a 38.69% drop in the company's operating profit compared with the same period last year. Due to the sale of backward production capacity, Arsinor increased its non-operating income by 14.116 million yuan compared with the same period last year, which reduced its net profit to 27.00%. If you deduct the net profit of 10.853 million yuan brought by Hailisheng Pharmaceutical, the company's net profit will only be 14.948 million yuan, a sharp drop of 57.71% compared with the same period last year.

Various measures have been taken to tide over the difficulties. The company takes a variety of measures to improve the business environment and tide over the difficulties. During the reporting period, the company acquired a 60% stake in Zhejiang Hailisheng Pharmaceutical Co., Ltd., which not only thickens the company's profits, but also gives the company a platform for the development of non-anti-infective drugs such as children's drugs and urinary system drugs. The company also packaged some of its low gross margin business assets into Asino subsidiaries for transfer; at the same time, it signed a "land acquisition agreement" with Datong Land Reserve Center to invigorate the company's assets. The above measures not only alleviate short-term contradictions, but also focus on long-term development, which play a positive role in the development of the company.

The product and income structure are gradually improving. The company acquired Hailisheng Pharmaceutical, introduced children's medicine and urinary system drug business, enriched the company's product line, but also provided a broader development platform. During the reporting period, due to the decline in anti-infective drug revenue and the increase in total revenue from acquisitions, the company's anti-infective drug revenue share has decreased from 71.79% in 2011 to 51.87%, and the gross profit contribution has also decreased from 78.12% to 46.95%. With the completion of the divestiture and sale of low-profit parts of the company's business and the production of new non-antibiotic drugs, the proportion of anti-infective drugs will further decline, and the company's revenue and profit structure will be more reasonable.

Earnings forecast and rating: regardless of the construction of investment projects and the impact of land collection and storage, we estimate that the company's EPS from 2013 to 2014 will be 0.26 yuan and 0.31 yuan respectively, and the corresponding dynamic price-to-earnings ratio will be 35 times and 29 times respectively based on the latest closing price. The company's anti-infective drug business is seriously affected by the policy and needs time to recover; the new acquisition business will thicken the company's profits and bring new areas of development, and the company's product and income structure will become more and more reasonable; the company's fund-raising projects have been unable to start construction for a long time, which adds uncertainty to the future development. to sum up, maintain the company's "neutral" investment rating.

Risk tips: 1) the risk of limiting the negative impact of the policy; 2) the risk that the market promotion of the company's superior products and new products is not up to expectations; 3) the risk that the implementation progress of the fund-raising project is slower than expected.