Performance summary: The company released its 2020 semi-annual report. 2020H1 achieved operating income of 82 billion yuan, an increase of 37.8% year on year; realized net profit of 220 million yuan, an increase of 92% year on year; after deducting non-net profit of 210 million yuan, an increase of 95.8% year on year. The performance was good, slightly exceeding expectations. APIs drive overall gross margin to record highs and improve the company's overall profit quality. 2020H1's profitability increased, achieving a gross profit margin of 44.2%, +4.3pp year over year. The company's main business is R&D, production and sales of high-end antibiotic raw materials and intermediates. By business: 1) Intermediates are the company's main business. In 2020H1, revenue of 40.7% was achieved, accounting for 60.5%; gross profit margin was 39.1%, +2.3pp year on year. 2) The share of APIs remained stable. 2020H1 achieved operating revenue of 320 million yuan, +34.2% year over year, accounting for 38.9%; gross profit margin of 51.8%, +8.3pp year on year, the main driving force for the company's overall gross margin growth. 3) In terms of pharmaceuticals, 2020H1 achieved operating income of 3.37 million yuan, a year-on-year decrease of 33.9%; gross profit margin of 80.4%, 3pp), making it the company's highest gross margin business. At the same time, all four expense ratios of the 2020H1 company declined, up 4.6pp year on year, driving the company's net interest rate to increase by about 7.5pp. Issuing fixed growth plans to help long-term future development. The company recently announced plans to issue shares to specific targets, and will raise no more than 1.06 billion yuan in capital. After deducting the issuance fee, the funds raised will be used for the “Fuxiang Biomedical Project” and the “Project with an annual output of 616 tons of navir intermediates and 900 tons of batan intermediates”. Carrying out efficient peinam-based antibiotic construction projects is beneficial to the company's vertical integration (intermediate-API) strategy and enhances the overall competitiveness of enterprises. The company established a wholly-owned subsidiary in Jingdezhen Fuxiang in April 2020, and is expected to eventually build a production base with an annual output of 2,500 tons of chiral drugs, 1,200 tons of biopharmaceuticals, and 500 million tablets (pack/stick) of pharmaceutical preparations, including products such as the anti-infective drug meropenem. Innovation lays the foundation for long-term development. By the end of 2020H1, the company had obtained 48 national patents, including 29 invention patents, 1 US invention patent, 22 products were recognized as provincial key new products; 1 new invention patent was declared in 2020H. The company is a mainstream supplier of beta-lactamase inhibitors in the world. It is one of the few domestic manufacturers of carbapenem series products with a full industry chain layout from initial raw materials to downstream APIs, and a major supplier of lovir intermediates in the global market. Its business includes antibiotic products and antiviral products. The company insists on strengthening R&D and innovation capabilities, which is conducive to future long-term development. Profit forecasting and investment advice. EPS is estimated to be 0.87 yuan, 1.08 yuan, and 1.35 yuan respectively in 2020-2022, corresponding to current valuations of 25 times, 20 times, and 16 times, respectively. The company issued a fixed increase plan to improve the vertical integration strategy from pharmaceutical intermediates and APIs to formulation production, is optimistic about the company's development, and maintains a “buy” rating. Risk warning: the risk of a sharp drop in the price of APIs; the risk of environmental regulatory penalties; the progress of production capacity release or falling short of expectations.