The performance was slightly lower than expected. The company announced its annual report and quarterly report. In 2018, it achieved revenue, net profit from mother, and net profit after deducting non-net profit of 20.5, 240 million yuan, and 240 million yuan, up 11%, 12%, and 21% year on year. 1Q19 achieved revenue, net profit from mother, and net profit of 5.8, 1.0, and 0.9 billion yuan, up 4%, 36%, 16% year on year, and performance slightly lower than our expectations. Considering the deceleration in paste and the slow resumption of growth in oral formulations, we expect net profit of 32/3.5/3.9 billion yuan (previous value: 3.5/4.2 billion yuan) in 19/20/21, an increase of 31%/11%/9% year-on-year, EPS of 0.54/0.60/0.66 yuan, net profit of 2.9/3.3/3.8 billion yuan, year-on-year increase of 18%/14%/15%. Referring to comparable company valuations (19x PE average value in '19), the 2019 PE valuation was 18-20 times, with a target price of 9.75-10.83 yuan, maintaining a “buy” rating. Patches: We estimate that our flagship product, Tongluo Pain Relief Cream, has maintained steady growth in sales, and is expected to resume sales of generic plasters in 2018. Revenue growth in 1Q19 is 5%, lower than our expectations: 1) We estimate that our flagship product, Tongluo Pain Relief Cream, had revenue of 5-6 billion yuan in 2018, with a year-on-year growth rate of about 10% (sales volume increased 10% year-on-year), mainly due to the promotion of OTC and the promotion of hospital agents, the revenue growth rate in 2019 is expected to return to more than 15%; 2) We estimate a slight decline in the revenue of generic plasters in 2018, including bone strengthening cream Sales volume fell 6%, and sales of moisture cream and joint cream fell by more than 20%. It is estimated that due to digestive inventory after the price increase in '17, we expect restorative growth in 2019; 3) Pediatric antipyretic patches benefited from influenza in early 2018. Sales volume increased close to 50% year on year, and is expected to maintain rapid growth in 2019. Oral preparations: The growth after channel adjustments is yet to be seen. Due to channel adjustments and product price increases/higher openings, there are differences: 1) The 2018 revenue of capsules increased 24% to 530 million yuan, mainly due to high product opening and price increases, sales of Peiyuan fell by more than 30% and sales of ginseng fell 7%. Considering the clinical coverage of Peiyuan and Astragalus, we expect the revenue growth rate of capsules to be 15% in 2018; 2) The revenue of tablets (mainly Danlu Tongdu tablets) in 2018 increased 10% to 87 million yuan, of which Film sales were almost the same year on year, channel The recovery growth after the conversion was lower than our expectations. Currently, Danlu has focused on OTC and clinics. 1Q19 tablet revenue fell by nearly 10%, and the performance is still worth watching. Operating indicators are stable 1) Stable growth in all terminals: retail pharmacy channel revenue increased 11% year on year in 2018 to 1.19 billion yuan, hospital and clinic channel revenue increased 11% year on year in 2018 to 840 million yuan; 2) sales rates remained high (1Q19 about 50%). The marketing platform was established in 2019, and we expect to maintain high investment; 3) 1Q19 accounts receivable reached 670 million yuan, the same level of year on year; 4) 1Q19 cash income ratio was about 93%, net cash flow reached 160 million yuan, higher than net profit. New and old alternated, Xiong Wei may take full control and create a new marketing platform. On April 25, the company announced that Chairman Cheng Jianjun left office. Cheng Jianjun was the former deputy of the old chairman Xiong Weizheng. We anticipate that the current general manager Xiong Wei (son of the old chairman Xiong Weizheng) may be promoted to chairman. Xiong Weinian has implemented many marketing reforms before, including the ointment division, oral preparations, and a new marketing platform in 2018 (the company has established Henan Lingrui Pharmaceutical Co., Ltd. to undertake the company's original OTC, primary care, and hospital clinical marketing teams to create the company's marketing platform.) etc. If you are successfully promoted, we believe that the governance structure is expected to be further improved. Risk warning: Clinic promotion falls short of expectations, and pressure on hospitals to control fees exceeds expectations.