Report Summary: Qizheng Tibetan Pharmaceutical released its 2018 semi-annual report: achieving revenue of 0.542 billion yuan, up 18.33% year on year; net profit to mother of 0.19 billion yuan, up 12.07% year on year; net profit after deducting non-return to mother of 0.179 billion yuan, up 9.21% year on year, in line with market expectations. Q2 revenue and net profit after deducting non-return to mother increased by 19.25% and 8.62% year-on-year respectively in a single quarter, continuing the steady growth trend in the first quarter. The company's gross margin during the reporting period was 88.08%, up 0.57pct year-on-year. The company's cost control was better, with a slight decrease of 0.3 pct in the year-on-year management expense ratio; the sales expense ratio increased by 2.37 pct year-on-year, mainly due to the company's strengthened channel layout; financial expenses were low, which did not have a significant impact. Major products are growing steadily, and new products are growing strongly. In the first half of the year, the company's core product, paste, achieved revenue of 0.417 billion yuan, up 20.82% year on year; gross profit margin was 88.27%, up 0.71 pct year on year. New products such as White Vein Ointment are still growing rapidly, and sales of proprietary oral medicines such as Safflower Ruyi Pills have increased markedly. Academic leading+brand building, further strengthening sales channels. The company attaches great importance to the construction of sales channels. It has an independent marketing team of more than 1,000 people to carry out marketing and sales work in major hospitals, primary care and retail markets with specialized academic promotion and brand promotion, continuously promoting channel sinking and expanding terminal coverage. In the first half of the year, it became the official strategic partner of the 2018 Lanzhou International Marathon, providing professional integrated musculoskeletal pain solutions for the event, further expanding the brand's influence. Clinical research and development continues to advance, and category reserves are constantly being enriched. The company is vigorously expanding its pain product line. The development of new products goes hand in hand with the secondary development of already marketed products to further increase the coverage of second-tier new products. There are more than 10 clinical research projects under development and post-marketing clinical research projects, and more than 10 basic research projects. Currently, phase II clinical research on colds and influenza has been completed, and phase III clinical studies are ongoing; breast patches have completed phase II clinical studies; and phase IIa clinical studies of analgesic aerosols to treat acute sprains are progressing smoothly. The company's 2018-2020 EPS is expected to be 0.82 yuan, 0.94 yuan, and 1.03 yuan respectively, and the corresponding PE is 33X, 29X, and 26X, respectively. Give it an “gain” rating. Risk warning: terminal promotion falls short of expectations, R&D progress falls short of expectations, risk of bidding and price reduction