Incident: The company released its 2018 three-quarter report. The company achieved revenue of 1.49 billion yuan (+7.06%) in the first three quarters, net profit of 116 million yuan (+13.34%), net profit after deducting non-return to mother of 97 million yuan (+11.54%); the company achieved revenue of 509 million yuan (+4.91%) in the Q3 quarter, net profit of 49 million yuan (+12.49%), net operating profit of 48 million yuan (+25.58%); the company's net operating cash flow for the first three quarters was 224 million yuan (+ 701.02%), mainly due to the maturity and monetization of the bill of exchange; EPS was 0.05 yuan (+13.42%). Comment: Core varieties are growing steadily, and the star product flubiprofen ester is promising. Many products have entered the base drug catalogue, helping sales growth, the oral formulation Xinnangning capsule and olivene oral milk benefit from the effects of chronic disease medication habits and are in a period of rapid rise; the focus is on promoting the product flurbiprofen ester injections for post-operative and cancer pain relief. The original research company is Japan Research & Pharmaceutical Co., Ltd., and the national market size of flubiprofen ester injections in 2017 was 2.3 billion yuan, an increase of 28.43% over the previous year, and has continued to grow rapidly in recent years. The company has completed the production declaration. It is expected to be approved for production and listing in 2019, and is expected to be replicated in the first three. The 2018 edition of the basic drug catalogue was announced recently. The company's four varieties, including injectable ganciclovir, injectable ifosfamide, injectable gemcitabine, and injectable pemetrexed disodium, have entered the catalogue, which is beneficial to sales volume. R&D investment continued to grow at a high rate. Consistency evaluation and injection re-evaluation progressed smoothly, and the company actively transformed high-end generic drugs and innovative drugs. The company invested 104 million yuan in R&D in the first three quarters, an increase of 86.72% over the previous year, accounting for 7% of revenue. It is mainly used to promote the consistency evaluation of products such as clindamycin, pemecoxel disodium, sodium hyaluronate, etc., and innovative drug projects such as JZC11 and JZC13. The company has stepped up the re-evaluation of injections and promoted management: tirofiban hydrochloride and lansoprazole have been approved for production; the re-evaluation of many injectable products such as irinotecan hydrochloride, clindamycin phosphate, pemetrexed disodium, and gemcitabine hydrochloride is progressing smoothly. Three of these are first-line clinical treatment drugs recommended by authoritative guidelines in the field of antitumor treatment. The consistency evaluation of sodium hyaluronate injections has been carried out. We expect the company to launch 3 solid preparations and 2 injections in 2019, and 8 solid preparations and 6 injections in 2020. Through Shangjin's layout of the US market, seeking international collaboration in formulations, and increased executive ownership, it shows the long-term development confidence of company executives. The company lays out the US formulation business through its subsidiary Shangjin. Shangjin is familiar with US market laws and regulations and pharmaceutical ANDA processes, and has many years of experience in R&D, production and sales of formulations and APIs in the European and American markets. The future will help the company to launch products more easily between China and the US. Currently, 7 products from Shangjin in the US have been declared for ANDA, and prescriptions and process research for 14 projects have been completed. It is expected that more than 10 products will complete ANDA declarations by the end of 2018. Recently, the company announced that the company's board secretary, vice president, and human resources director each increased their holdings of the company by no more than 300,000 shares, totaling 1.2 million shares, demonstrating confidence in the company's long-term development. Profit forecast and valuation According to the company's current business situation, we estimate that the company's EPS for 18-20 was 0.22/0.25/0.27 yuan, respectively, and the corresponding valuation was 20/18/16 times, respectively, maintaining a “highly recommended” rating. Risk warning: Formulation growth falls short of expectations; risk of impairment of goodwill; risk of industry policy.