Matters: The company announced its 2018 three-quarter report, achieving revenue of 1,492 billion yuan (+7.06%), net profit of 117 million yuan (+13.34%), and net profit of 97 million yuan (+11.54%) after deducting non-return to parent net profit. EPS is 0.1,327 yuan. The performance was in line with expectations. The third quarter achieved revenue of 510 million yuan (+4.91%) and net profit of 50 million yuan (+12.4**** An's view: Product structure changes affect the gross profit margin, and the cost ratio is generally stable: the company's gross margin is 73.53% (-1.52pp), mainly due to changes in product structure, higher growth in chemicals and traditional Chinese medicine solid formulations, and the gross profit of these products is lower than that of traditional Chinese medicine injections such as Shenxiao; the total of the three rates is 61.40% (+0.89pp), with little change. Among them, the sales expense ratio was 39.54% (-2.80pp), mainly due to the company's marketing reforms and adjustments to sales team personnel and marketing models; the management expense rate was 17.74% (+4.50pp), mainly due to increased R&D investment; and the financial expense ratio was 4.12% (-0.81 pp). Following the path of generic drugs with international characteristics, the product line is becoming more and more rich: the company approved a total of 6 products in the third quarter, namely 2 registered approved Tirofiban hydrochloride concentrated solution for injection, lansoprazole for injection, 3 clinical batches of alprostadil injections, injections of recombinant human follicle-stimulating hormone, injections of recombinant human type B natriuretic peptides, and a supplementary application for analgesic activation. An increasingly rich product line lays the foundation for the company's performance growth. In addition, four varieties of the subsidiary Hainan Jinrui have been newly added to the base drug catalogue, namely ganciclovir for injection, ifocinamide for injection, gemcitabine for injection, and pemetrexed disodium for injection. Inclusion in the base drug catalogue is expected to promote sales of these varieties at the grassroots level. Maintaining the “recommended” rating: The company's main business is growing well. Driven by marketing reforms, it is expected that future performance will also maintain steady growth. It is expected that flurbiprofen will be listed next year, which will bring new growth points at that time. Due to bid price cuts and industry restrictions on the use of some drugs, the company's sales of some products were affected, so the profit forecast was lowered. The estimated EPS for 2018-2020 was 0.22/0.26/0.32 yuan (the original forecast was the 2018-2020 EPS was 0.23/0.29/0.37 yuan, respectively), maintaining the “recommended” rating. Risk warning 1. Policy risk: The pharmaceutical industry policy is frequent, drug price reduction, two-vote system, and zero bonus policies all have an impact on the company's business in the short term. 2. The risk that the product will not win the bid: The company's products are basically prescription drugs and need to be sold in hospitals. If important varieties are not sold in certain provinces, it may have an impact on sales revenue. 3. Research and development progress falls short of expectations: There is a possibility that drug development will fail in the entire process. The company has many ongoing research projects, and some important varieties have entered the clinical stage. Failure may have a negative impact.