Event: The company released three quarterly reports: from January to September 2017, it achieved revenue of 3.453 billion yuan, an increase of 16.00% over the previous year; net profit of 174 million yuan, a year-on-year increase of 94.74%; and EPS per share of 0.38 yuan. Key investment points: steady growth in revenue, further improvement in profitability. The company achieved revenue of 1,049 billion yuan in the third quarter of 2017, an increase of 7.31% over the previous year. We believe that the main reason is that pharmaceutical revenue slowed down this quarter due to delays in price reduction, and sales of APIs were under pressure due to rising prices. Judging from the company's profitability, the net interest rate for the first three quarters was 5.30%, a year-on-year increase of 2.00 and 0.55 percentage points. The year-on-year increase was mainly due to gross margin. We believe that it mainly benefited from API prices, formulation processes, and the end of relocation, which led to a year-on-year increase in gross margin of major products; while the month-on-month increase was partly reflected in cost control, the sales expenses rate and management expense ratio for the first three quarters decreased by 0.17 and 0.10 percentage points, respectively. It is also related to the significant increase in non-operating income due to the company's land acquisition and storage income in July-September. Formulations and APIs are two-wheel drive, and employee shareholding injects vitality. As the consistency evaluation progresses, the sales volume of the company's main strategic pharmaceutical varieties and key generic drug types is expected to continue to grow. Coupled with expectations of price increases for low-priced drugs, the performance of the pharmaceutical business is expected to grow steadily. The API side, on the other hand, has benefited from this cycle of price increases. The next three years are expected to increase overall performance and bring room for flexibility. Furthermore, the company successfully completed fixed growth in October. Among them, the employee stock ownership plan with the active participation of core managers and business personnel made interests consistent and injected vitality into the company's development. Maintain a “Recommended” rating. According to the share capital adjustment after issuance, we expect the company's 2017-2019 EPS to be 0.41/0.56/0.69 yuan, maintaining the “recommended” rating based on performance elasticity brought about by APIs, stable growth expectations in the pharmaceutical business, and improvements in the company's operating quality. Risks suggest that pharmaceutical sales are slower than expected; expenses are rising faster; and gross margin is falling more than expected, etc.