Incidents: The company's 2018 operating income and net profit after deduction were about 1.62 billion yuan and 380 million yuan respectively, with year-on-year growth rates of about 38.5% and 81.4% respectively; 2018Q4 operating income and net profit after deduction were about 600 million yuan and 150 million yuan respectively, with year-on-year growth rates of about 38.6% and 35.7% respectively. Continue to expand pharmacy terminals, and the quality of operations may improve. The company's revenue in 2018 was about 1.62 billion yuan, with a year-on-year growth rate of about 38.5%. Among them, revenue from traditional Chinese medicine was about 1.28 billion yuan, up about 34.8% year on year; revenue from fine traditional Chinese medicine was about 210 million yuan, up about 52.9% year on year; and health wine revenue was about 500 million yuan, up about 106% year on year. By product, the revenue of ordinary turtles was about 400 million yuan, an increase of 4.3% over the previous year; the revenue of Dingkundan honey pills was about 390 million yuan, an increase of 39% over the previous year; and the revenue of ordinary Angong Niuhuang pills was about 260 million yuan, a year-on-year growth rate of about 99%. The main reason for the company's rapid revenue growth is to strengthen terminal channel development. Currently, its products have covered nearly 150,000 chain stores (+50%) across the country, including nearly 40,000 management terminals (+33%). By continuously improving market layout and marketing system construction to promote channel decline and coverage, product market share and terminal sales rates have increased. The company's withheld non-net profit during the period was about 380 million yuan, an increase of about 81% over the previous year. The specific analysis is as follows: 1) gross margin was about 81%, down about 1.3 percentage points from the previous year, mainly due to the increase in commercial share and changes in revenue structure; 2) the period's expense ratio was about 49.3%, down about 7.6 percentage points from the previous year; among them, management expenses remained flat, sales expenses grew lower than revenue growth, and overall control was good. The 2018Q4 operating income and net profit after non-net profit were about 600 million yuan and 150 million yuan respectively. The year-on-year growth rates were about 38.6% and 35.7% respectively. The decline in gross margin in the single quarter was related to some additional depreciation. Accounts receivable at the end of the period was approximately $1.34 billion, a year-on-year increase of about 82%, which is related to the increase in the number of newly launched terminals. In its 2018 annual report, the company proposed business goals for 2019, namely “revenue of 2 billion yuan and profit of 4.2 billion yuan”, to reduce performance growth expectations or shift the management focus to improving the quality of operations. As product bargaining power increases and systems are implemented, accounts receivable and cash flow are expected to improve in 2019. The production capacity bottleneck problem was solved, and the product line was gradually enriched. 1) The production capacity bottleneck was solved, and the product line was gradually enriched. The company has a wealth of products in reserve. Most of them are OTC medical insurance varieties, and the synergy between various types of development is obvious. At present, the new factory area has been put into use. A rich product line will help the company break through revenue bottlenecks and consolidate its brand strength in chain terminals. At the same time, we expect that the market volume of Dingkundan oral liquid and Guiling Liquor will rise, or bring new growth points; 2) Actively expand the sales network and collaborate on product brand building. Cooperation with leading businesses and top 100 pharmacy chains across the country and the region continues to be strengthened. Currently, the number of hospitals above level II covered by the company has increased to 4,791, OTC terminals to 150,000, and management terminals to nearly 40,000. At the same time, we are also promoting activities such as a good pregnancy counter, and the brand power is gradually increasing. Profit forecast and rating: The estimated EPS for 2019-2021 is 1.27 yuan, 1.61 yuan, and 2.03 yuan (the original forecast for 2019-2020 was 1.86 yuan and 2.62 yuan respectively; the reason for the reduction is the decline in product growth expectations and the increase in the sales expenses ratio). The corresponding price-earnings ratios are 26 times, 21 times, and 16 times, respectively. We believe that as the company's efforts to promote products have increased, the number of terminal channel layouts has increased rapidly, and the performance growth rate and quality have improved or exceeded expectations, maintaining the “buy” rating. Risk warning: Product sales or unmet expectations, market expansion or unmet expectations.