Industry and trade went hand in hand, driving the company's profitability to increase, and the company released the 2018 semi-annual report. During the reporting period, it achieved revenue of 14.529 billion yuan (+0.41%), net profit of 840 million yuan (+26.41%), and net profit after deduction of 771 million yuan (+20.52%). In the first half of 2018, medical reform policies such as the “two-ticket system” and “zero drug addition” led to a sharp decline in the company's pharmaceutical commercial sector allocation business, so revenue growth slowed down. At the same time, the company is actively optimizing its business structure, and the gross margin of the pharmaceutical industry, commerce, and trade sectors is growing rapidly. During the reporting period, the company's gross sales margin was 22.58%, up 9.65% year on year, and net sales margin was 6.88,%, up 1.59% year on year, further increasing profitability. The company's sales expenses during the reporting period were 1,616 billion yuan (+219.53%), a significant increase, mainly due to the continuous increase in the sales scale of the pharmaceutical industry and the impact of medical reform policies, and the company's sales and publicity expenses increased dramatically. High-margin products grew rapidly, and the transformation of the industrial sector marketing system progressed steadily during the reporting period. During the reporting period, the company's pharmaceutical industry sector achieved revenue of 2,867 million yuan (+64.99%) and net profit of 368 million yuan (+33.39%), and both revenue and profit maintained rapid growth. The company has a comprehensive product layout in the industrial sector, with nearly 600 drug varieties, and more than 300 of them included in the medical insurance catalogue at all levels. Among them, revenue from the two dominant fields of anti-infectives and cardiovascular and cerebrovascular drugs was 1,486 million yuan and 840 million yuan respectively, up 45.81% and 130.24% from the previous year. The gross margin of central cerebrovascular drugs is 84.94%, ranking first among all types of drugs. At the same time, the company actively expanded research and development in anti-tumor drugs and other fields. Revenue from hormones, endocrine-regulating drugs, and traditional Chinese medicine and internal medicine increased brilliantly during the reporting period, with growth rates of 89.21% and 79.77%, respectively. With the continuous optimization of the product structure, the gross margin of the company's industrial sector was 67.15%, an increase of 21.89% over the previous year. Furthermore, the transformation of the company's industrial sales system is progressing steadily. As Zhongjian Company officially operates and completes the transition between production and marketing, the company's refined investment level has improved, and the marketing system has been gradually improved. The “two-vote system” affected the allocation of business revenue. The increase in the share of pure hospital sales led to an increase in profit due to the impact of policies such as the “two-vote system” and medical insurance fee control. The company's pharmaceutical commercial sector allocation business declined markedly. Revenue during the reporting period was 8.917 billion yuan, down 7.05% from the previous year. At the same time, the share of net sales of hospitals with high gross margins increased significantly, so the overall profitability of the sector increased, achieving net profit of 260 million yuan, an increase of 18.77% over the previous year, and a gross margin of 8.67% (+2.00%). The company continues to implement the “Point Strength Network” network layout. At present, it has completed a nationwide marketing network system focusing on Beijing, Guangdong, Jiangxi, Henan, Hebei, Hubei, Xinjiang, Heilongjiang and Liaoning. In the first half of the year, the company successively acquired companies such as Shenyang Zhuying and Jinlun Pharmaceutical, further expanding the terminal network and optimizing the product and business structure. Actively developing new overseas markets. The international trade sector contributed more than 50% of profits during the reporting period. During the reporting period, the company strengthened the development of overseas markets, improved the quality of operations, and achieved breakthroughs in the introduction of advantageous single products and foreign aid business. During the reporting period, international trade achieved revenue of 3.26 billion yuan, a year-on-year decrease of 5.99%, mainly due to the fact that some medical device businesses are in the stage of replacing old and new varieties, and sales are still in the gradual development stage; at the same time, with the continuous optimization of the business structure, the profitability of the trade sector has been significantly enhanced, achieving net profit of 429 million yuan, an increase of 43.56% over the previous year. The valuation and rating company's business and product structure has been continuously optimized, and profitability has improved markedly; the “industrial and commercial trade” integration strategy helps the company's long-term development. The estimated net profit for 2018-2020 is 15.73/18.90/2,301 billion yuan, corresponding to EPS 1.47/1.77/2.15 yuan/share, maintaining the “buy” rating. Risk warning: market competition risk, exchange risk, bad debt risk due to increased accounts receivable and cash flow pressure risk, market expansion falling short of expectations, etc.