Key investment events: In the first three quarters of 2020, the company achieved operating income of 918 million yuan, a year-on-year decrease of 13.94%; realized net profit of 124 million yuan, a year-on-year increase of 37.41%; net profit after deduction of 103 million yuan, an increase of 22.54%; and operating cash flow of 181 million yuan, an increase of 31.44% year-on-year. Q3 The performance improved significantly from month to month, and the company entered a period of growth at an accelerated pace. In Q3, the company achieved revenue of 310 million yuan in a single quarter, a year-on-year decrease of 2.73%, net profit of 39.16 million yuan, an increase of 55.40% over the previous year. Performance continued to improve month-on-month. The year-on-year growth rate of revenue and net profit increased sharply from the second quarter, up 14.54 points and 18.44 points, respectively. In 2019, production of the company's intermediates 7-ADCA and cephalosporin APIs was greatly affected due to the discontinuation of production of the subsidiary Jiangsu Yuexin. Beginning in '20, 1) Jiangsu Yuexin resumed production in the second half of the year. Previously, affected intermediates and APIs recovered rapidly. 2) In terms of formulations, the company's core stock of levolamlodipine benzenesulfonate (a calcium antagonist type antihypertensive agent) has contributed steadily to cash flow in the past, and product release will accelerate after the consistency evaluation is approved. 3) Alpha ketoic acid is another core product of the company. The specialty APIs are exclusively supplied by international pharmaceutical giant Fresenius Kabi. The release of production capacity will drive revenue growth in the future, while new alpha ketoic acid tablets are expected to be gradually approved in the future, bringing new performance growth points to the company. Judging from the situation in the third quarter, the company's performance has accelerated into a period of high growth. Continue to promote consistency evaluation work to open up room for growth in the future when new formulations are launched. Policies such as volume procurement and the two-ticket system have profoundly changed the competitive pattern of the generic drug market. The company adheres to R&D innovation, and has mastered core technologies such as cephalosporin intermediates, enzymatic processes for APIs, and alphaketoic acid synthesis through years of independent research and development. Through the continuous promotion of consistency evaluation work, the company's pharmaceutical product launch is progressing well. We expect that starting in 2022, the company's products such as tigurello tablets, compound alpha-ketoic acid tablets, edicalciferol, buvaracetam, LCZ696, lanthanum carbonate, and polycarboxylic acid will be marketed one after another. The market space for this type of formulation is broad, and the competitive pattern is good. It is expected that it will open up broad growth space for the company in the future. The gross margin has increased dramatically, the high proportion of pharmaceutical revenue has improved the sales structure, and the company's profitability has been strengthened. In the first three quarters of 2020, the company achieved a gross profit margin of 81.61%, an increase of 9.75pt over the previous year. Since 2020, the company's gross margin has entered a range of more than 80%, mainly due to the increase in the company's pharmaceutical product volume and share in the revenue structure. At the same time, the company's expense ratio for the first three quarters was 65.49%, an increase of 5.72 points over the previous year. In the future, the increase in sales scale driven by the launch of new types of formulations will continue to dilute the company's expense ratio and further enhance the company's profitability. Profit forecast and investment rating: In view of the rapid release of the company's formulations and the accelerated increase in net profit, we raised the company's profit forecast. The estimated net profit of the mother in 2020-2022 is 1.98, 2.82, and 379 million yuan, respectively. The corresponding EPS is 2.20, 3.14, and 4.21 yuan respectively, and the corresponding PE valuations are 22, 15, and 11 times, respectively. Considering the broad scope of the company's future pharmaceutical products, short-term production capacity release and existing formulation volume still have high performance elasticity, the compound profit growth rate for the next three years is expected to be close to 50%, maintaining the “buy” rating. Risk warning: New product development falls short of expectations; risk of major products not passing the consistency evaluation; risk of production safety; risk of industry regulation and policy changes, etc.