Event: The company released the 2020 semi-annual performance report: the first half of 2020 achieved 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 after deduction of 208 million yuan, an increase of 95.77% over the previous year. Net cash flow from operating activities was $209 million. The company's interim performance exceeded expectations, and gross margin continued to rise. In the first half of this year, when the pandemic had a general impact on the pharmaceutical industry, the company still achieved both revenue and profit growth, and the year-on-year profit growth rate was as high as 92.00%. We believe that the company's performance exceeded expectations. We think there are two main reasons why the company's performance has exceeded expectations. First, the downstream antimicrobial formulation market continues to grow, driving the company's business growth rapidly. Furthermore, the company's product prices have also risen to a certain extent, causing gross margin to continue to rise. The company's gross margin for the first half of the year was 44.21%, an increase of 4.34 percentage points over the previous year. The company has obvious advantages in the field of antibiotic APIs. Long-term product demand is stable. The company is a professional manufacturer of beta-lactam inhibitors. By continuously establishing and perfecting the production chain and promoting R&D and process improvement, the company has developed into one of the world's major suppliers of sulbactam and tazobactam. At the same time, through independent research and development, introduction and absorption, and process expansion, the layout of the complete industrial chain for peinam-like products has been completed, and it is also an important supplier of carbapene-like products. Batam antibiotic compounds and penemide preparations are high-end antibiotics, and demand for downstream preparations is strong; for example, piperacillin sodium, tazobactam sodium compound, global sales reached US$2.163 billion in 2017, and it is expected that there will still be a double-digit growth rate in the next few years; due to the medium to rapid growth in the downstream drug meropenem, supply and demand for 4-AA intermediates is still tight. The company is actively expanding horizontally and vertically, laying the foundation for long-term growth. Weifang Aotong, a holding subsidiary of the company (70% of shares), is a professional antiviral drug manufacturer. Advanced intermediates of guanine and downstream ciclovir are already being produced (production capacity 800 tons), and will be extended to the Acyclovir series of APIs in the future; ketone and chlorol will be extended to epoxides (one of the 3 most important intermediates of navir), and in the future, to navir APIs. In addition, Aotong also has R&D reserves for a number of antiviral drug products, which will be put into production one after another later. In addition, the company mainly uses high-end antibiotics and extends upstream and downstream. The enzyme inhibitor aseptic powder and powder mixture projects related to the main business can meet production conditions in mid-2020, and the production conditions for peinam-based oral and sterile APIs are expected to reach production conditions by the end of 2020. Upstream 4AA and Peynum intermediates plan to further expand production to meet rapidly growing market demand. Also, in July 2020, the company's agatroban injection was approved for listing. The domestic sales scale of this variety reached 540 million yuan in 2019, and the competitive pattern is good, so the company is expected to quickly gain a certain market share. Profit forecasts and investment ratings are based on the above analysis. We raised our previous profit forecasts. We expect the company's operating income in 2020-2022 to be 18.28, 22.54, and 2,624 billion yuan, respectively, with year-on-year growth rates of 34.99%, 23.32%, and 16.40%, respectively, and net profit of 4.23, 5.30, and 667 million yuan respectively. The year-on-year growth rates are 38.19%, 25.45%, 25.74%, and EPS is 0.91, 1.15, and 1.44 yuan respectively. The current stock price corresponds to PE PE They are 22X, 17X, and 14X respectively, giving them an “increase in holdings” rating. Risk warning: risk of worsening competition patterns for antibiotic APIs and intermediates; risk of falling product prices; risk of poor expansion of new business.