This report is read as follows:

The company announced three quarterly reports, the results are in line with expectations, the company has gradually achieved a rich product structure of anti-biological, anti-tumor and specialty drugs, tamped the foundation for medium-and long-term development, and maintained the company's holding rating.

Main points of investment:

Maintain the "overweight" rating. It is estimated that the company's EPS for 2017-2019 will be 0.26 yuan (0.29 yuan for 2017-2019) (the forecast EPS for 2017-2019 before dividends will be 0.77 yuan (0.88 yuan), and the target price for dividends will be 10.58 yuan, corresponding to about 41x for 2017, and the company's overweight rating will be maintained.

The performance is in line with expectations. In the first three quarters, the company achieved operating income of 1.482 billion yuan (+ 69.35%), net profit of 237 million yuan (+ 51.96%), and non-return net profit of 227 million yuan (51.17%).

The effect of epitaxial M & An is remarkable, which promotes the rapid growth of performance. The company completed the acquisition and listing of only Chu Pharmaceutical in June 2016 and Tianheng Pharmaceutical in May 2015, entered the field of biological fermentation, and laid out specialized drugs for blood lipid regulation, diabetes and oncology. According to the performance commitment at the time of M & A, the combined committed net profits of the two companies in 2017 were 120 million yuan and 60 million yuan respectively, totaling 180 million yuan. According to the data for the first half of the year, the realized net profit of the subject matter of mergers and acquisitions totaled 112 million yuan, which is expected to achieve the performance commitment target for the whole year, promoting the company's performance to continue to grow.

Realize the transformation and development of multi-category product line. The company has gradually realized the rich drug structure of antibiotics, antineoplastic and characteristic specialties, and has nearly 100 reserve varieties in many treatment fields, such as anti-tumor, cardio-cerebrovascular, anti-infection and so on. Most of them have obtained clinical approval or are applying for production approval. The company is actively transforming from an original antibiotic enterprise to an enterprise with the coordinated development of antibiotics and specialist drugs, laying a solid foundation for medium-and long-term development.

Risk hint: the risk of drug price reduction.