Incident: On October 24, 2018, the company released its performance report for the third quarter of 2018: for the first three quarters of 2018, the company achieved revenue of 905 million yuan, an increase of 26.67%; realized net profit of 294 million yuan, an increase of 25.27% over the previous year; and realized net profit of 274 million yuan after deduction, an increase of 21.15% over the previous year. 2018 Q3 revenue was about 258 million yuan, up 9.63% year on year; net profit from returning mother was about 83.7667 million yuan, up 13.03% year on year; net profit from non-return mother net profit was 76.3746 million yuan, up 8.95% year on year. Comment: Benefiting from the sharp increase in pharmaceutical and overseas business, revenue increased 26.7% in the first three quarters of 2018, 25.27% year-on-year. Performance growth was basically in line with expectations: sales side, in the first three quarters of 2018, the company achieved revenue of 905 million yuan, up 26.7% year on year. According to business segments, domestic pharmaceutical products achieved revenue of 46,400 yuan, up 50.88% year on year; the overseas market achieved revenue of 272 million yuan, up 70.28% year on year; Chengji Pharmaceutical's revenue was 987.442 million yuan, year-on-year Decreased by 42.86%. On the profit side, net profit from the mother was 294 million yuan, an increase of 25.27% over the previous year, and the performance growth was in line with expectations. Mainly affected by the low and high opening of revenue from the two-ticket system and increased marketing promotion, the sales expense ratio increased by 12.6 pct in the first three quarters of 2018, the period expenses increased by 8.72 pct over the previous year, and the cumulative share repurchase in 2018 was about 100 million yuan, demonstrating the company's confidence in long-term development. The share of company period expenses in the first three quarters of 2018 was about 52.20%, an increase of 8.72 percentage points over the previous year. Among them, it was mainly affected by lower to higher opening and higher marketing investment. The sales expense ratio was about 39.33%, up 12.61 percentage points from the previous year; the management expense ratio was about 13.21%, down 2.28 percentage points from the previous year. During the reporting period, the company's share repurchases totaled 6.27 million shares, accounting for about 0.067% of the company's total share capital. The highest transaction price was 17.19 yuan/share, the lowest transaction price was 10.25 yuan/share, with a cumulative total amount of 999.72 million yuan (excluding transaction fees). The share repurchase has been completed, effectively increasing EPS, demonstrating the company's confidence in long-term development. Waiting for liraglutide and gratirel to be approved overseas to help overseas businesses release volume quickly, the company's liraglutide and gratiramine APIs have passed the integrity assessment. Among them, the company's liraglutide APIs have gradually broken through the technical difficulties of impurities. The production line has been certified by the FDA and the European Union, and has a stable and reliable quality system. Liraglutide patents in the US, Europe, and the US will expire in 2022, which is the golden period for generic drug applications. Glatirel is the drug of choice for multiple sclerosis, with global market sales of 3.8 billion US dollars in 2017, of which 75-80% of revenue comes from the US market. The original research drug patent has expired, but it is difficult to replicate. Currently, only two generic drugs, Sandoz and Mylan, have been approved for listing. The company has broken through the technical difficulties of APIs in the past ten years of research and development. The company is submitting ANDA applications for glatiramine injections as soon as possible to compete for the 3.8 billion US dollar market. Profit forecast and valuation: Based on the company's current business progress, we slightly lowered the company's performance growth rate to 25.5%. We estimated that the company's 18-20 EPS was 0.44/0.57/0.75 yuan respectively (repurchases reduced share capital have been estimated to enter), corresponding to 23/18/14 times PE, maintaining the “highly recommended” rating. Risk warning: formulation growth falls short of expectations; export of APIs falls short of expectations; risk of impairment of goodwill; risk of industry policy.