Investment points The low performance in 2019 has passed, and it is expected that the compound annual growth rate of net profit for the next three years will not be less than 35%: after 2017, the pharmaceutical business faced increased competition in the context of policies such as volume procurement and the two-ticket system, while the API and intermediates business had a net profit growth rate of only 7.5% and 3.3% in 2018 and 2019 due to the discontinuation of production of some products and declining sales volume. In 2020-2021, after the consistency evaluation of the core drug stock varieties (levochlorodiphenyl benzenesulfonate) passed the product release, the resumption of production in Jiangsu Yuexin brought about improvements in the API and intermediates business, and the first-phase production of alpha ketoacid specialty APIs climbed; after 2022, new formulations (alpha ketoic acid tablets, etc.) are expected to be gradually approved, and the company's revenue structure was greatly optimized. We judge that 2019 was the low growth rate of the company's net profit, and the compound annual growth rate of the company's net profit in 20-22 was not less than 35%. Pharmaceutical business: Existing varieties provide excellent cash flow, and new formulations open up space for the company to grow. The current main variety, levolamlodipine benzenesulfonate, is currently the main source of pharmaceutical revenue, and the cash flow situation is good. In 20-21, the company continued to promote the consistency evaluation of superior varieties, stabilized the basic formulation market, and achieved sales breakthroughs in products such as cefaclor sustained-release tablets. Beginning in '22, products such as ticagrelor tablets, compound alpha-ketoacid tablets, edicalciferol, buvaracetam, LCZ696, lanthanum carbonate, and polycarboxylic acid are expected to be marketed one after another. The market space for this type of formulation is broad, and the competitive pattern is good. The company has a strong competitive advantage in key intermediates and APIs. It is expected that this new type of formulation will be an important increase in the company's revenue and profit, support the increase in revenue several times, and open up room for growth. API and intermediates business: Looking at the resumption of production in Jiangsu Yuexin in the short term, looking at the performance elasticity brought about by the expansion of alpha ketoic acid production in the long term, and the introduction of other specialty APIs. The Jiangsu Xiangshui incident is basically over. Jiangsu Yuexin is expected to resume production in the second half of 2020, and the profitability of 7-ADCA and cephalosporin APIs will recover (previously, 7-ADCA lost more than 30 million, and cephalosporin APIs is expected to affect net profit of more than 10 million yuan). Alpha Ketoic Acid Specialty Pharmaceutical Company is the only domestic supplier of international giant Fresenius Kabi. The API has high technical barriers, product supply is in short supply, and the net interest rate is 35%. The company's production capacity was expanded from 150 tons to 750 tons, and production capacity can be effectively digested. We estimate that after the addition of the first phase and full production capacity of the second phase, we can achieve revenue of 4.2 billion yuan (excluding the initial 150 tons), attributable to the listed company's net profit of 75 million yuan, which is highly elastic in performance. Profit forecast and investment rating: The company's revenue for 2020-2022 is expected to be 1.6 billion, 1.9 billion, and 2.5 billion yuan, respectively, with growth rates of 14.5%, 19.4%, and 30% respectively. The company's net profit for 2020-2022 is expected to be 162 million, 220 million and 296 million yuan respectively, with growth rates of 44%, 36%, 35%, and a three-year compound net profit growth rate of up to 38%. The company's EPS in 2020-2022 is expected to be 1.80, 2.44, and 3.29 yuan respectively. The current stock price corresponds to the valuation 35X, 26X, and 19X, respectively. Considering that the company 1. The pharmaceutical business fully benefited from the consistency evaluation and the greater flexibility brought about after the research product was approved; 2. The API business was given a “buy” investment rating for the first time, based on the valuations and growth rates of comparable companies, based on the valuations and growth rates of Jiangsu Yuexin, Jiangsu, and the release of alpha ketoic acid production capacity. Risk warning: The company's product sales fell short of expectations; Jiangsu Yuexin's resumption of production fell short of expectations; and product development progress fell short of expectations.