2020H1 performance is growing steadily, in line with expectations. During the epidemic, the industrial sector continued to be under pressure, and the international trade plate grew at a high speed. We will continue to promote the strategy of "one body and two wings" and strengthen the core competitiveness through market development.

2020H1 performance is growing steadily, in line with expectations. In the first half of 2020, the company realized revenue, return net profit and deducted non-return net profit of RMB 18809, 777 and 750 million respectively, respectively, compared with the same period last year. The net operating cash flow was-1.674 billion yuan. From the perspective of a single quarter, 2020Q2 realized revenue, net profit and non-return net profit of 11.324 billion / 513 million / 495 million yuan respectively, which were + 31.44% and 93.80% respectively compared with the same period last year. The company's 2020H1 performance recovered steadily and Q2 accelerated, mainly due to the large number of exports of epidemic prevention materials from the international trade plate and the domestic pharmaceutical commercial plate actively undertaking epidemic prevention business and exploring new sales models, which were basically in line with expectations.

During the epidemic, the industrial sector continued to be under pressure, and the international trade plate grew at a high speed. The 2020H1 pharmaceutical industry sector achieved revenue of 1.902 billion yuan, down 28.95% from the same period last year, and operating profit decreased by 78.53% to 49 million yuan compared with the same period last year, mainly due to the epidemic situation and collection, medical insurance catalogue adjustment, limited resistance and other policy factors. The commercial sector achieved revenue of 12.169 billion yuan, an increase of 12.15% over the same period last year, and operating profit of 319 million yuan, down 36.83% from the same period last year, mainly due to the reduction of hospital net sales business and the extension of the account period. The revenue of the international trade sector reached 7.244 billion yuan, an increase of 84.02% over the same period last year. The operating profit reached 863 million yuan, up 112.28% over the same period last year, mainly due to the company's efforts to do a good job in the reserve and export of epidemic prevention materials during the epidemic, and to efficiently promote the import and export business related to epidemic prevention. and take this as an opportunity to speed up the construction of the international marketing system, establish a deep consolidation of stock business with South America, Africa, West Asia, Central Asia and other regions, and actively expand the blank market. Strengthen the rolling development and promotion of overseas projects. During the reporting period, the sales expense rate decreased from 3.67PCTs to 10.49%, mainly due to the decline in sales of the company's pharmaceutical industry products promoted by the epidemic and collection and acquisition; the management expense rate (including R & D) decreased by 0.33PCT to 2.36%, mainly due to the slight delay in the progress of the research project under the epidemic, which is expected to resume in the second half of the year with the full resumption of work and production. The financial expense rate increased 0.24PCT to 0.70%, mainly due to the company's increased borrowing to supplement working capital and Chongqing pharmaceutical equity project funds, and a slight increase in interest expenses.

We will continue to promote the strategy of "one body and two wings" and strengthen the core competitiveness through market development. During the reporting period, the company's integrated two-wing strategy was vigorously promoted. In the first half of the year, amoxicillin capsule, clindamycin hydrochloride capsule, rosuvastatin calcium capsule and finasteride tablets passed the generic drug consistency evaluation, among which amoxicillin capsule has successfully won the bid in the second round of national collection. In the new product development project, cefdizide sodium for injection, oxiracetam injection and Atto vastatin calcium tablets have been approved, and the raw materials oxiracetam and esomeprazole sodium have passed the technical evaluation. Complete the declaration of ganciclovir for injection and ceftazidime for injection. Increase market development efforts and deepen the reform of the sales system. At the same time, the company continues to strengthen the construction of the marketing system, carrying out the development idea of "attracting investment to the county, promoting to the hospital, OTC to the store", fully promoting the development of the grass-roots market, tamping the market competitiveness, speeding up the development of the non-standard market and the second and third terminals, focusing on promoting the construction of the promotion line of its own varieties. During the reporting period, the company continued to explore online sales models, cooperate with mainstream e-commerce businesses to increase online product sales, and build regional advantages by establishing a China Pharmaceutical-Chongqing Pharmaceutical "business association" to rapidly extend the market to the western region, initially realizing the national network layout, promoting the sinking of sales channels, actively carrying out innovative sales models such as "Internet +", and enhancing core competitiveness.

Risk factors: international operation risk, customer credit risk, gross profit margin decline caused by excessive competition, and so on.

Profit forecast and rating. The company's industrial sector fine investment and commercial plate point strong Netcom strategy continues to advance, 2020 revenue is expected to gradually recover, profitability is expected to improve. Maintain the company's 2020-2022 EPS forecast of 1.02 pounds 1.17 pounds 1.36 yuan, maintain the "overweight" rating.