Matters: The company announced its 2017 performance forecast. It is expected that net profit in 2017 will increase by 50-100% year-on-year, that is, net profit is in the range of about 184-244 million yuan. Net profit for 2017 Q4 is expected to be 0.1-0.7 billion yuan, slightly lower than expected. Comment: The high growth in 2017 benefited from API price increases and the release of core drug varieties. The company's solid investment in environmental protection and the quality of APIs has been fully recognized by multinational pharmaceutical companies. In 2017, it enjoyed the dividends of API price increases under strict environmental protection control; the API business revenue is expected to increase by about 12-18% during the reporting period, combined with high net interest rate elasticity, which has become one of the main drivers of the company's performance growth. In terms of pharmaceuticals, the company's six core pharmaceutical products are expected to achieve sales growth of about 25% under the dividends of internal sales system reform and the introduction of new medical insurance for some varieties. The expected increase in investment in R&D and sales expenses is one of the reasons why the net profit growth rate is slightly lower than expected. During the reporting period, the company invested a lot of R&D expenses in consistency evaluation, new drug development, and overseas application; sales system reform and promotion of core products such as Jiening brought about a relatively rapid increase in sales expenses. It is estimated that these factors are one of the reasons why net profit growth was slightly lower than expected. However, we believe that the above investment will lay the foundation for subsequent growth. In 2018, the company is expected to make new progress in consistency evaluation, overseas generic drug reporting, sales system division management, and terminal coverage. Generic drug consistency evaluations and formulation exports are advancing at an accelerated pace. In 2017, the company has launched BE for 9 varieties, and it is expected that BE will be completed and a consistency evaluation will be submitted in 2018. In terms of pharmaceutical exports, the company's export sales volume is expected to nearly double in 2017. Ibuprofen capsules and loperamide capsules have officially entered the UK market; signed a CMO agreement with Sinochem DSM for the atorvastatin calcium tablet project, completed DMF registration for 13 products in 32 countries, etc. Furthermore, the company has begun the ANDA filing process for the US market, and is expected to make some progress in 2018. Risk factors: R&D progress is lower than expected, and drug bidding prices have been reduced. Maintain a “buy” rating. We believe that the company's pharmaceutical business is growing at an accelerated pace, that APIs are benefiting from price increases brought about by supply-side contraction, that pharmaceutical exports are advancing at an accelerated pace, and that the consistency evaluation layout is leading. Considering short-term cost increases and uncertainty in export business, the profit forecast for 2017-19 was lowered to 0.45/0.62/0.86 yuan (original forecast 0.49/0.72/1.00 yuan) to give 30 times PE in 2018, corresponding to the target price of 18.47 yuan. Maintain a “buy” rating.