With its unique product “cool dew” and strong marketing capabilities, Qinghai Spring obtained a 20-year sales contract for “cool dew” products by acquiring 100% of the shares of Tibet Tinghua Liquor Co., Ltd. “Cool dew” is positioned as “the world's first liquor made for spiciness”. It aims to improve discomfort caused by spicy food. It is a new drink with strong functionality and clear consumption scenarios, and has a large market space. Qinghai Spring is investing resources online, represented by the “China on the Tip of the Tongue 3” advertisement, and offline, represented by the Chengdu bus and subway advertisement, and has the operational capacity to unleash the consumption potential of the “cool dew” market. We are optimistic about the market demand prospects for “cool dew” and the revenue and profit elasticity this product will bring to Qinghai Spring. It covered Qinghai Spring for the first time and gave it a “buy” rating. Affected by changes in national food and drug regulatory policies, Qinghai Spring's main business before 2016, Qinghai Spring's main business was Cordyceps sinensis products. Due to changes in policies related to Cordyceps sinensis by the State Food and Drug Administration, it was decided to stop pilot work on the use of Cordyceps sinensis in health food. Production of pure Cordyceps sinensis powder, the original main product of Qinghai Spring, stopped on March 31, 2016. The company acquired 100% of Tibet Tinghua Liquor Co., Ltd. for RMB 33.85 million in accordance with the board of directors's requirement to “make full use of its advantages and experience in R&D capabilities, product innovation, market planning, management, etc., to achieve the development of new business segments including the FMCG industry through independent R&D, equity investment, mergers and acquisitions, etc.”. Tinghua Liquor has signed a 20-year contract for the sale of Lianglu Liquor Co., Ltd. with Yibin Lianglu Liquor Co., Ltd. The “Cool Dew” product is uniquely positioned. Combined with Qinghai Spring's own marketing capabilities, the market prospects are broad, and Liqueur is positioned as “the world's first wine made to be spicy”, and is committed to improving discomfort caused by spicy food. Cold brew is a small 125ml bottle with an alcohol content of 31 degrees, and the retail price is about 29 yuan/bottle. The cooling substances in alcohol can relieve numbness caused by spicy food by affecting sensory receptors, and also soothe gastrointestinal irritation caused by capsaicin. Qinghai Spring makes full use of its business advantages in advertising and marketing to promote consumer awareness of “cool dew” products through a combination of online (“China on the Tip of the Tongue 3” advertising) and offline (including bus and subway advertisements in core markets including Chengdu). Referring to the Chinese herbal tea market and the development history of the representative company Gadobo, we believe that “cool dew”, which has a clear functional positioning, is expected to expand across the country through the development of spicy food culture after starting in the base market represented by the Sichuan and Chongqing regions. We are optimistic about the revenue and profit elasticity that “cool dew” brings to Qinghai Spring, and give it a “buy” rating. We believe that the uniquely positioned “cool dew” will be sold nationwide under Qinghai Spring's strong marketing capabilities, and this will bring obvious revenue and profit elasticity to Qinghai Spring. According to our profit forecast, Qinghai Spring's revenue for 2018-2020 will reach 783 million yuan, 1,316 million yuan and 2,005 billion yuan respectively; net profit attributable to the parent company will reach 287 million yuan, 558 million yuan, and 778 million yuan respectively. The valuation level of comparable companies was 31 times PE in 2018. Considering Lianglu's rapid revenue growth in 2018, Qinghai Spring was given a PE valuation of 31 to 32 times that of 2018. The corresponding target price range was 13.95 yuan to 14.40 yuan, which covered a “buy” rating for the first time. Risk warning: Product market demand falls short of expectations; channel expansion rate is lower than expected; sales expense ratio is higher than expected; food safety issues.