Event: The company announced its 2017 performance report. Net profit attributable to the parent company is expected to be 184 million yuan to 244 million yuan, an increase of 50%-100% over the previous year. Key investment points: Performance continues to grow at a high level. We expect the company's net profit growth rate in 2017 to be in the middle, with net profit of 210 million yuan, an increase of 71% over the previous year, and continue to maintain relatively rapid growth. Net profit for the fourth quarter is expected to be 36 million yuan in a single quarter, an increase of 5% over the previous year. Compared with the company's net profit growth trend in the first half of 2017, the growth rate declined in the second half of the year. We think the main reason is that the margin of increase in the company's API profit began to appear in the second half of 2016, corresponding to the increase in the base for the second half of 2017. Judging from the types of price increases, transaction prices for analgin and caffeine began to increase in July, with price increases of 6% and 11%, respectively. The margin was relatively limited, and considering the impact of Shandong's environmental inspection in July on production. Antipyretic and analgesic APIs have entered a long-term boom. The company currently has a stable supply pattern after a long period of low price competition for the core raw drug types of metamizin, caffeine, ibuprofen, and aspirin. The small production capacity has basically been reduced. As the pattern is concentrated, supply-side premiums have increased, and environmental supervision trends have been strengthened in recent years, and supply-side production capacity is limited. We judge that the current antipyretic and analgesic APIs have entered a boom cycle. As of December 2017, prices of ibuprofen, analgin, caffeine, and aspirin have increased by 10%, 16%, 47%, and 22%, respectively, over the same period. We expect an overall price increase of more than 15% in 2018. Through consistency evaluations, the company's high-quality formulations are resilient to growth. The company has been exporting contract formulations overseas for multinational companies for a long time. Its process standards and quality systems meet international standards. Currently, 57 product regulations have been evaluated for consistency (ranked 5th in the number of filings). Most of them are fiercely competitive varieties. Among the top 10 varieties registered alone, there are 4 companies (amoxicillin capsules, cephalexin capsules, cefradine capsules, and norfloxacin capsules). The market size of these varieties is large and scattered, and the company's varieties currently account for a small share (market rate less than 5% in the future). There is plenty of room for market share growth, and there is considerable performance flexibility. The employee stock ownership plan was completed, stimulating endogenous growth momentum. In October 2017, the company completed the non-public offering of a shareholding plan for employees. The issue price was 9.36 yuan per share, and the ban was lifted for 36 months. The employee stock ownership plan covers the company's main executives and core employees. The implementation of the plan will help establish a long-term internal incentive mechanism, stimulate the enthusiasm of the company's management and key employees in various departments, and also demonstrate management's confidence in the company's long-term future development. Continue to be optimistic about the company's API boom and the elasticity of formulation growth, and maintain the buying rating. Considering the performance cycle of the company's increased R&D investment and API price increases, the company's 2017-2019 EPS was lowered to 0.44, 0.74, and 1.07 yuan, corresponding to PE of 30, 18, and 12X. Considering that antipyretic and analgesic APIs are still at the beginning of a boom cycle, and performance elasticity is high. At the same time, the company's formulation continues to grow strongly. Consistency ratings provide new opportunities, and there is room for improvement in valuations, maintaining buying ratings. Risk warning: The company's pharmaceutical sales fell short of expectations; the prosperity of the API business declined; the implementation of the consistency evaluation policy fell short of expectations and differentiation.