Event: Yongtai Technology released the 2017 interim report: achieving operating income of 1,234 million yuan, YoY +32%, net profit of 221 million yuan, YoY +99%, EPS of 0.27 yuan, deduction of non-net profit of 93 million yuan, YoY -11%, and cash flow from operating activities - 202 million yuan. Among them, the second quarter achieved quarterly revenue of 707 million yuan, YoY +38%, QoQ +34%, net profit of 56 million yuan, YoY -22%, and QoQ -66%. In the first half of the year, Fuxiang Pharmaceutical received investment income of 145 million yuan due to reduced holdings. The company expects the net profit range for the first three quarters of 2017 to be 307-344 million yuan, and YoY+150~ 180%. Investment income from Fuxiang Pharmaceutical increased significantly due to the reduction in holdings in the first half of the year. In addition to the holdings reduction in the first half of the year, the company reduced its holdings by a total of 1.123,300 shares from August 8 to 10. The company is expected to receive investment income of about 36 million yuan after tax. Opinion: The vertically integrated industrial chain of the pharmaceutical sector continues to strengthen. At the end of 2016, the company completed asset transfers of 100% of Zhejiang Shouxin's shares and 90% of Foshan's shares. Through this merger and acquisition, Yongtai Technology quickly realized a vertically integrated pharmaceutical business chain from pharmaceutical intermediates and APIs to pharmaceuticals. The performance promise is that the cumulative net profit of Zhejiang Shouxin (100% equity) and Foshan Shouxin (90% equity) from 2016 to 2018 will not be less than 225 million yuan, with a compound growth rate of about 10-15%. In the first half of 2017, Zhejiang Shuxin achieved operating income of 144 million yuan, net profit of 31.48 million yuan, and Foshan Shuxin achieved operating income of 41.69 million yuan and net profit of 5.57 million yuan. The company used its own capital of 33.75 million yuan to participate in 15% of Ambison's shares to strengthen the company's competitiveness in the pharmaceutical field through consistent evaluation of pharmaceutical service capabilities, oral solid formulation research and development capabilities, drug registration capabilities in international markets such as the US and WHO, and factory GMP and management capabilities over the years. Yongtai Pharmaceutical has successively obtained the “Pharmaceutical GMP Certificate” and the EU CEP certificate for duloxetine hydrochloride APIs, and the pharmaceutical internationalization project has also entered the trial production stage. The pesticide sector is expanding downstream. With its leading overseas pesticide registration certificate advantages and channel network advantages in more than 60 countries around the world, Shanghai Longhui has promoted the rapid growth of the company's pesticide trade. In the first half of 2017, Shanghai Nonghui achieved operating income of 316 million yuan and net profit of 16.32 million yuan. Lithium battery materials are about to be put into production, expanding the fluorine chemical business. The company's Yongtaigao New Year's production of 3,000 tons of lithium hexafluorophosphate and 1,000 tons of lithium bifluorosulfonimide in Fujian Shaowu Holdings is undergoing equipment installation, commissioning and plant construction. We expect it to be put into operation by the end of 2017 or early 2018, and is expected to become a new profit growth point in the future. CF photoresist starts the import substitution process. The company's 1,500-ton CF photoresist project is in the equipment procurement and installation stage. The company will continue to promote product testing with Huaxing Optoelectronics to achieve an order breakthrough. Performance promises are motivating enough, and equity incentives demonstrate confidence in future development. ① When purchasing Zhejiang Shuxin & Foshan Shuxin, the company's actual controller promised that the company's cumulative net profit from 2016 to 2018 (excluding Zhejiang Shuxin and Foshan Shuxin's promised performance) would not be less than 1.2 billion yuan. Otherwise, the actual controller would make up the difference in cash. ② The equity incentives target a total of 398 people, including senior company directors, middle managers, and core technical (business) personnel, accounting for about 20% of the company's total number of people. The performance promise is that the non-net profit growth rate from 2017 to 2019 will not be less than 260%, 320%, and 380% respectively, and the deducted non-net profit growth rate will not be less than 260%, 320%, and 380% respectively, and the deducted non-net profit will not be less than 216 million yuan, 252 million yuan, and 288 million yuan respectively. Reducing the holdings of Fuxiang Pharmaceutical has greatly increased investment income. Currently, the company still holds 10.97 million shares of Fuxiang Pharmaceutical, with a corresponding market value of 534 million yuan. We expect the company to reduce its holdings one after another by the end of 2018, at which time it is expected that investment income will increase significantly. Conclusion: Taking into account the remaining stock sales of Jiangxi Fuxiang, Zhejiang Shuxin, and Foshan Shouxin, we expect net profit from 2017 to 2019 to be 381 million yuan, 586 million yuan, and 349 million yuan respectively. According to the latest share capital dilution, EPS is 0.46 yuan, 0.71 yuan, and 0.42 yuan respectively. Currently, the corresponding P/E of the stock price is 31 times, 20 times, and 34 times, respectively. Maintain a “Recommended” rating. Risk warning: New business development, integration of acquired companies, and investment in new production capacity have fallen short of expectations.