Key investment events: The 2017 performance forecast is to achieve net profit of 184-244 million yuan, an increase of 50-100% over the previous year. Fourth-quarter results resumed high growth, and API sales returned to normal. The company's annual performance is estimated to be around 220 million yuan in the forecast range. It is estimated that the fourth quarter achieved net profit of about 46 million yuan, an increase of about 40% over the previous year. Net profit after deducting non-return to the mother is estimated to be around 40 million, and the growth rate is around 80%, returning to rapid growth in the first and second quarters. The low Q3 performance is related to the pace of API delivery. It is estimated that Q4 API sales have returned to normal, and performance also continued the high growth trend. The prices of the company's four main APIs, ibuprofen, analgin, aspirin, and caffeine, have continued to rise since the beginning of 2017, and are still at a high level. Considering that the API is expected to lag 3-6 months from order signing to confirmation, it is expected to remain at a high level for 18 years, ensuring continued growth in 2018. Chemical formulation consistency evaluations are expected to improve performance and valuation levels. The company is actively promoting the consistency evaluation strategy. 38 varieties have been declared as reference formulations, ranking high among domestic enterprises, and 7 varieties have entered the BE stage. The market for these varieties is highly competitive, with an average number of approvals exceeding 30, and the average market share of PDB sample hospitals in 2016 was 1.89%. The average market share of conformance evaluated varieties is expected to increase from 1.89% in 2016 to 5% in 2020, thereby significantly increasing the revenue and profit elasticity of the formulation business. Considering that the variety market competition pattern that has passed the consistent evaluation is better and that net interest rates are also expected to increase, the corresponding valuation level is also expected to increase. The price increase of low-priced drugs has reached 1-3 times, which is expected to increase pharmaceutical profits. Many of the company's products are low-priced drugs. With the implementation of the national low-cost drug policy, prices have increased markedly. For example, the average winning bid price for each tablet of pirpiperate tablets (0.25g) increased from 0.15 yuan to 0.45 yuan (2016 revenue is estimated at 30 million yuan, price increase is 200%; currently only 9 provinces have increased the price of low-priced drugs), and the average winning bid price of aspirin enteric extended-release tablets (0.05g) has increased from 0.45 yuan to more than 0.88 yuan (2016 revenue is estimated at 20 million yuan, with a price increase of 100%. Currently, only 10 provinces have increased the price of low-priced drugs), and the average winning price of glimepiride tablets per tablet has increased from 1.0 yuan to 0.5 yuan ( Revenue in 2016 is estimated at 20 million yuan, with a price increase of 100%. Currently, only 4 provinces have increased the price of low-priced drugs), the average winning bid price of nimodipine tablets has increased from 0.1 yuan to 0.2 yuan (2016 revenue is estimated at 10 million, the price increase is 100%; currently only 7 provinces have increased the price of low-priced drugs), and the average winning bid price of each ibuprofen tablet (0.1 g) has increased from 0.05 yuan to 0.2 yuan (price increase of 300%; currently only 2 provinces have increased the price of low-priced drugs). Profit forecast and investment advice: According to the performance forecast, we adjusted the profit forecast. We expect the 2017-2019 EPS to be 0.47 yuan, 0.65 yuan, and 0.85 yuan (the original forecast values were 0.57 yuan, 0.90 yuan, and 1.16 yuan respectively), and the corresponding PE is 28 times, 20 times, and 15 times, maintaining the “buy” rating. Combining the high profit growth in 2018 and the API industry average of 29 times PE, 30 times PE was given in 2018, with a target price of 19.50 yuan. Risk warning: risk of API growth rate or fall short of expectations, risk of pharmaceutical sales falling short of expectations, and risk of consistency evaluation falling short of expectations.