Main opinion: The rise in saponin prices favors the company's control of the industrial chain and pricing power. Corticosteroids are the company's largest leading product, accounting for 57.37% of the company's operating income in the first half of 2012. Since 2007, the price of the raw material saponin has risen from 100,000 yuan/ton to nearly 1 million yuan/ton recently, an increase of as much as 10 times, but the prices of the main products, dexamethasone and hydrocortisone, have only about doubled. Although the price of saponin increased significantly from year to year, the company's gross margin did not drop much. We believe that this situation is conducive to companies taking advantage of scale and technology to seize the pricing power of the industrial chain. The future growth of the corticosteroid industry is highly certain. Although the downstream customers of corticosteroids are exclusively pharmaceuticals, and their demand is very rigid, usage is only measured in “kilograms”, which makes corticosteroids a relatively special type of bulk drug. We believe that the future growth of the corticosteroid industry will mainly come from: 1) international giants will gradually withdraw from the production of corticosteroid raw materials; 2) crowding out the domestic SME market; 3) the development of new corticosteroid dosage forms; and 4) the new application of corticosteroids. We expect that as the company takes control of pricing power, the company's corticosteroid API revenue is expected to increase by more than 20% in 2013, while gross profit is expected to gradually recover. The development of the pharmaceutical business is expected to increase the company's valuation. On the basis of the advantages of APIs, the company has gradually implemented a strategic plan to develop pharmaceutical products. The company's 11-year tablet revenue is 70 million. It is estimated that 12-year tablet revenue is basically the same as in '11. The main products mainly include four varieties: dexamethasone acetate tablets, methylprednisolone tablets, prednisone acetate tablets, and triamcinolone tablets. As the company begins to increase sales of pharmaceutical products, the growth of dominant varieties such as methylprednisolone tablets and triamcinolone tablets is expected to accelerate. We believe that the sales revenue of the company's pharmaceutical products is expected to reach a growth rate of 40-50%. Highlights of products under development Many companies have always attached importance to investment in scientific research. In 2012, the company focused on technological innovation, accelerated the pace of independent research and development, and completed 76.05 million yuan in science and technology investment in the first half of the year. Currently, the company's main R&D direction is new dosage forms and new products. The company also has a rich inventory of products under development, mainly celecoxib (for arthritis), etaclotiponol (treatment of various intraocular inflammations and anti-allergies), and cyclosonide (a new generation of corticosteroid anti-asthma drugs). Additional issuance is expected to strengthen the company's core competitiveness. On May 18, 2012, the company announced the adjusted issuance plan. It plans to issue no more than 101 million shares to no more than 10 specific targets at a price of not less than 5.49 yuan/share, and raise no more than 550 million yuan in total capital. The company received approval from the China Securities Regulatory Commission on November 12, 2012, and is expected to complete this additional issuance in the first half of the year. We believe that the significance of this increase is: 1) injecting the amino acid API business to increase corporate profits; 2) narrowing the gap between the company and the leading level of international microbial transformation technology, and greatly improving the company's core competitiveness; 3) saving the company's environmental costs and improving the company's environmental protection level.