Core view: The company is a high-quality generic drug enterprise integrating APIs and formulations. The company is a generic drug enterprise integrating APIs and formulations, and has advantages in the cost and quality of formulations. The company has an API production capacity of 35,000 tons, a total annual production of more than 25,000 tons of chemical APIs, and an annual pharmaceutical production capacity of 8 billion tablets, 300 million injections, and 200 million capsules. At the same time, the company is one of the top 10 domestic pharmaceutical exporters. The product quality has been recognized by Bayer and Bailey's multinational pharmaceutical companies, and exports more than 100 million yuan of pharmaceuticals every year. API companies have transformed pharmaceutical production. The company's large formulation strategy has benefited from sales reforms and medical insurance adjustments, and the general medicine business has benefited from the low price drug policy and consistent evaluation of the company's implementation of the large formulation strategy. Currently, the gross profit of pharmaceuticals has reached 50%. The company's strategic varieties will benefit from the 2017 national health insurance catalogue adjustments in the future, and both Jiening and Baochang have a large market space. Generic drug products benefit from price increases in low-priced drug catalogs and the promotion of consistency evaluation policies. In the consistency evaluation, as an established state-owned enterprise, the company has an advantage in product quality, and the number of filings is among the highest among domestic enterprises. As the domestic generic drug integration stage begins, health insurance funding favors high-quality and low-cost generic drugs. The company is expected to benefit from the purification of the industry environment, and its market share is expected to continue to increase. The API industry benefits from the fact that the environmental management company is the largest production base for antipyretic and analgesic drugs in Asia, producing more than 20,000 tons of APIs per year. With environmental management, the prices of major products are rising, and it is expected to provide stable financial support for the company's transformation in the future. Profit forecasting and investment rating The company's employee stock ownership plan participated in the non-public offering, and management and shareholders' interests were consistent. We expect the company's EPS in 17-19 to be 0.50 yuan/0.64 yuan/0.80 yuan respectively, corresponding to PE of 28/22/18 times. The company is a leading domestic high-quality generic drug, integrated APIs and formulations, and a strong industrial base. It is the target for the first time. It is covered for the first time. It gave a “buy” rating. Risks suggest that domestic business is affected by price cuts in tenders; pharmaceutical exports fall short of expectations; significant increases in R&D costs; and the risk that the consistency evaluation has not passed.