Key investment matters: The company announced the 2020 semi-annual report, achieving revenue of 816 million yuan, an increase of 37.82% over the previous year; realized net profit of 219 million yuan, an increase of 92.00% over the previous year; and realized net profit of 208 million yuan after deduction, an increase of 95.77% over the previous year. The company's performance is in line with expectations. Among them, the 2020Q2 quarter achieved revenue of 449 million yuan, an increase of 51.16% over the previous year; realized net profit of 135 million yuan, an increase of 122.88% over the previous year; and realized net profit of 123 million yuan after deducting non-return to the mother, an increase of 96.02% over the previous year. Ping An's view: The semi-annual performance was impressive: 2020H1 achieved revenue of 816 million yuan (+37.82%) and net profit of 219 million yuan (+92%), continuing its impressive performance. On the one hand, 2019H1 has a low base due to factors such as workshop modifications and upgrades; on the other hand, the COVID-19 pandemic is increasing rapidly in the company's demand for Peinam-based and antiviral products. The gross margin of 2020H1 company was 44.21%, an increase of 4.34 pp over the same period of the previous year. The total period expense ratio was 11.42%, a decrease of 4.57 pp from the same period of the previous year. Among them, management expenses and financial expenses decreased significantly. The growth trend of 2020H1 phenamol and antiviral products is obvious: in 2019, the company's tazobactam series, sulbactam series, phenam, and antiviral products accounted for 34%, 24%, 21%, and 9% of revenue, respectively. Judging from downstream demand and product competition patterns, we expect 2020 H1 penemens and antiviral products to maintain a rapid growth trend. The total production capacity of Peinam-based products is about 800 tons, of which Fuxiang is about 200 tons. The remaining production capacity is mainly in Haixiang and Jiuzhou. The company plans to increase production capacity by 600 tons of 4-AA and 200 tons of meropenem and 616 tons of antiviral intermediates, and the industry position is expected to further improve. Product reserves continue to be abundant, extending to the downstream formulation end to enhance initiative: The company has abundant reserves of API products. Currently, the main varieties being developed include tenofovir ester, cisatacin, emtricitabine, and efaviren. Among them, antiviral APIs will benefit from the company's relevant intermediate production capacity reserves. In terms of novel enzyme inhibitors, AAI101 has completed phase 3 clinical trials, and the company is currently providing APIs for the original research; avibatan has completed a small trial on the patent avoidance route, and is expected to be emulated for the first time. At the same time, the company is actively expanding downstream of the industrial chain. In 2019, the company issued convertible bonds to raise capital for the 450 ton piperacillin/tazobactam (8:1) sterile powder project, which helped the company upgrade from non-sterile to sterile APIs; furthermore, Fuxiang (Dalian), as one of the pharmaceutical business platforms, agatuban has been successfully approved; the company signed a cooperation agreement with the Jingdezhen People's Government to obtain 1001 mu of biomedical project land, which will become the company's main base for pharmaceutical production in the future, and the possibility of the company's future CMO business is not ruled out. Profit forecast and investment rating: The company's main varieties continue to grow steadily, and product reserves continue to be abundant, opening up growth space for active downstream expansion and upgrading of the industrial chain. We maintain the company's forecast of net profit of 401 million yuan, 473 million yuan, and 540 million yuan respectively in 2020-2022. The current stock price is 23 times that of PE in 2020. The company currently has outstanding valuation and cost performance ratio in the specialty APIs, maintaining a “recommended” rating. Risk warning: 1) Market competition risk: The company gradually begins research and development of sterile APIs and formulation technology, combining it with the company's existing API production advantages to ensure the company's ability to continue to grow in the future. If the company is unable to smoothly expand existing products downstream or enrich product lines, future market growth space and competition will adversely affect the company's operations. 2) Risk of environmental incidents: The company's main business is in the API and intermediates industry. The production process has a great impact on the environment. There is a risk of environmental incidents such as pollutant leakage and substandard emissions due to human or other factors. 3) R&D risk: Currently, the company has many research projects and is in a relatively early stage. The R&D risk is high and investment is high. There is a possibility that the company's R&D projects will fail and progress below expectations.