Aquaculture industry: What is the impact of the implementation of anti-resistance policies on the demand for chlortetracycline? Gold mycin is inexpensive and effective, and is the most commonly used veterinary antibiotic. Since downstream users have low demand elasticity and low sensitivity to gold mycin prices, enterprises can shift part of the cost pressure to downstream through price increases, thereby securing their own profit margins. The addition of growth-promoting antibiotics to feed has been prohibited since January 1, 2020. After the implementation of this policy, the industry regulation model for chlortetracycline changed from “veterinary drug addition” to “veterinary drug”, and the US has adopted a management model similar to that of China since 2017. “Antibiotic restriction” is not equal to “anti-resistance”. Before and after the policy was introduced, although the amount of antibiotics used in the US declined, the amount of prescriptions used increased dramatically, which led to a sharp increase in overall usage in the industry. Overall usage increased by nearly 10% in 2018. Considering the changes in usage and referring to the average usage volume in the US, we expect the potential dosage of chrysomycin for animal feed in China to be about 150,000 tons, while domestic sales volume in 2018 is more than 40,000 tons, so there is huge room for potential growth in the future. The company's gold mycin sector: As an industry leader, what are the company's core competitive advantages? The supply in the chlortetracycline industry shows a pattern of duoligopoly. Compared with its competitors, Jinhe Biotech has a larger revenue scale, higher gross margin, and significant cost advantages. We believe that the company's cost advantages stem from many aspects, including location advantages, environmental advantages, scale and technical advantages. In the future, as large-scale factories continue to fill the ranks and the concentration of farming increases, demand for the use of gold mycin is expected to further open up, while the tight supply side makes room for gold mycin to continue to increase prices. The company's domestic potential revenue space is over 1.5 billion yuan: 1) Demand side: In practice, adding gold mycin in low doses has the effect of promoting growth. Judging from foreign experience, after the cessation of additional uses to promote growth, the death rate of piglets will increase markedly, production performance will decline markedly, and demand will shift towards prevention and treatment. 2) Supply side: Central China is relocating the old factory area, and production capacity is expected to be reduced from nearly 30,000 tons to 20,000 tons. Affected by this, the overall production capacity of the industry will be reduced by nearly 10%, and the company, as the largest manufacturer, is expected to benefit from it. The company's animal vaccine sector: after years of intensive layout, can we turn a loss into a profit this year? The company has seized a critical period of upgrading and integration in the vaccine industry. In recent years, it has quickly entered the veterinary vaccine industry through mergers and acquisitions of Hangzhou Youben and US Protech, becoming a rising star in the industry. Relying on two vaccine business platforms at home and abroad, and making full use of vaccines from international advanced technology development companies, the company has developed strong technical research and development capabilities and product code resources. The company is actively increasing investment in scientific research and technological innovation in the vaccine business, cooperating with many scientific research institutes, colleges and universities to transform product production processes and improve the quality of the company's products. As the company's investment in veterinary vaccine research continues to increase, the launch of new vaccines in the future will add new business growth points to the company. As the epidemic stabilizes and downstream supplements continue to rise, the company's vaccine business is expected to bottom out and pick up. Profit Forecast and Investment Recommendations We expect net profit of $1.74/2.80/375 million yuan in 19/20/21, to be 6.59%/60.32%/34.07% year-on-year, and EPS of 0.27/0.44/0.59 yuan, respectively. We believe that the demand for the chlortetracycline industry is rigid, the competitive pattern is good, and the company's leading position is stable and has pricing power. At the same time, the company actively promotes business development in the fields of vaccines and environmental protection, continues to improve competitiveness, and performance is expected to grow steadily. Based on this, 30 times PE was given in 2020, with a target price of 13.2 yuan to maintain the “buy” rating. Risk warning: risk of policy changes; risk of the pandemic; risk of new product expansion falling short of expectations