Events:

The company announced that the revenue in the first three quarters of 2018 was 286 million yuan, an increase of 28.23% over the same period last year; the net profit was 6.0334 million yuan, down 79.50% from the same period last year; the net profit after deducting non-return was 4.8317 million yuan, a decrease of 82.24% over the same period last year; and the basic EPS was 0.04 yuan. Overall performance is in line with expectations.

Main points of investment:

Q3 revenue is growing rapidly, and the expense rate has improved during the period.

18Q3's revenue was 123 million yuan (+ 70.02%), its net profit was 1.706 million yuan (- 21.31%), and its revenue exceeded 100 million yuan in a single quarter. The month-on-month increase of 64.53% is mainly due to 1) Q3 Fu Ganding income of 14.5374 million yuan, an increase of 13.90% compared with Q2. 2) Jiangsu ZTE realized revenue of 36.61 million yuan in the second quarter. Q3 gross profit margin has declined compared with Q2, which is expected to be mainly due to changes in product structure and M & A factors. In terms of expenses, the Q3 sales expense rate was reduced by 55.82% compared with the previous period, and the management expense rate was greatly improved. The overall Q3 expense rate was 65.66%, which decreased significantly compared with the previous period.

Investment in R & D continues to increase, and global innovative drugs are progressing smoothly.

In the first three quarters of 18 years, the company invested 87 million yuan in R & D, accounting for 30.42% of revenue. The proportion of R & D is in the forefront of listed companies, and the increasing proportion year by year also shows that the company attaches importance to R & D work. At present, the R & D investment is mainly the consistency evaluation cost of GST-HG161 (clinical application accepted), GST-HG141 two global innovative drugs and entecavir and other liver disease drugs, and the R & D expenditure rate is close to 60%.

Be optimistic about the prospect of varieties being researched by the company.

It is estimated that the annual return net profit of the company in 18-19-20 will be 0.29cm 0.37 / 37 million yuan, and the corresponding share price PE will be 142.81109.59 times of 110.71max. The company focuses on the field of drugs for liver disease, tenofovir is about to be released, and the market for new drugs is broad, covering for the first time, giving it a "cautious recommendation" rating.

Risk hint

Drug sales fall short of expectations; research and development progress falls short of expectations