Onlikon: Two-wheel drive for APIs and formulations, and the company's performance has improved steadily. Onlikon is a modern pharmaceutical company integrating pharmaceutical raw materials and pharmaceutical formulation businesses. The company's API business includes raw materials for α-ketoacid and cephalosporin antibiotics. The formulation business mainly covers anti-infective and cardiovascular preparations. Currently, the company is the largest manufacturer of α-ketoacid specialty APIs in China, and is the only domestic supplier of Fresenius Kabi's core raw materials, a leading company in the compound α-ketoacid market. Furthermore, the market competitiveness of the company's formulation products should not be underestimated. Cefracloclol sustained-release tablets are the first and only domestic variety to complete the consistency evaluation, and levamlodipine benzenesulfonate tablets are in a leading position in the consistency evaluation. The company currently maintains a good development trend, and the company's performance improved steadily in 2015-2019; in the first three quarters of 2020, the company's performance grew at an accelerated pace, with operating income of 918 million yuan, a year-on-year decrease of 14.94%, and achieved net profit of 12,423 million yuan, an increase of 37.41% over the previous year. α-ketoacid raw materials: Fresenius Kabi's only domestic supplier, production capacity continues to expand. According to a research report published by The Lancet, China has 132.3 million chronic kidney disease (CKD) patients, making it the country with the highest number of cases in the world9. A-ketoic acid is a nutritional supplement for CKD patients during low-protein diet treatment. In 2019, the sales volume of compound a-ketoacid in domestic sample hospitals reached 750 million yuan. Among them, Germany's Fresenius Kabi Kaitong (trade name) is the product with the highest market share in the domestic market. The company is the largest domestic manufacturer of α-ketoic acid APIs and the only domestic supplier of Fresenius Kabi a-ketoic acid APIs. In 2019, the company completed the second phase expansion sub-project of the ketoic acid phase 1 project. The production capacity of α-ketoacid reached 300 tons/year. In the first half of 2020, the company sold 56.81 tons of α-ketoacid raw materials, an increase of 45.84% over the same period of the previous year. Operating revenue reached 39.318 million yuan, a year-on-year increase of 47.16%, and achieved a net profit of 15.185 million yuan, an increase of 89.52% over the previous year. The technical barriers for α-ketoacid APIs are high, and the supply of products is in short supply. The company plans to further expand production capacity to 7.5 million tons, which can achieve revenue of 525 million yuan and net profit of 184 million yuan for α-ketoic acid APIs. Cephalosporin antibiotic raw materials: Yuexin's resumption of production and new cooperation have found a turning point for the business. The company's cephalosporin API products mainly include the three major varieties of cephalexin, cefradine, and cefaclor. The company has independent production capacity for 7-ADCA intermediates, forming an integrated industrial model of pharmaceutical intermediates, cephalosporins, and cephalosporin preparations. Previously, Jiangsu Yuexin was in a state of discontinuation due to technological transformation and the Xiangshui incident. Production of cephalosporin APIs declined. In August 2020, Yuexin already resumed production, and 7-ADCA and cephalosporin API businesses will resume profits. In October 2002, the company and Colon Biotech reached a strategic cooperation in the entire cephalosporin API industry chain. Against the backdrop of intense industry competition and stricter environmental protection, Colon's environmental protection advantages and cost advantages have improved the company's industry's ability to withstand risks and can occupy an advantageous position in the cephalosporin API market. Formulation business: The competitive potential of core products has increased, which is expected to lead to increased performance. In the short term, the company's formulation business mainly focuses on core varieties such as vascular preparations and anti-infective agents, while increasing investment in research and development. Many varieties under development are expected to enrich the product pipeline and adapt to long-term development. The company's core product “Zuoyi” (trade name for levamlodipine benzenesulfonate) is the main source of revenue for the formulation business. Sales volume in 2019 increased by about 15% over the same period last year. Thanks to cost advantages and leading position in consistency evaluation work, the product is expected to be released after entering the collection list. In terms of cephalosporin preparations, the company has a relatively complete industrial chain system, with advantages in intermediates and APIs. The company's cephalosporin preparations have greater profit margin and market competitiveness. The company's cefaclor sustained-release tablets are the first product in the country to pass the consistency evaluation, and are expected to enter collection and continue to be released. Company profit forecast: We expect the company's revenue from 2020 to 2022 to be 1,538 billion yuan, 2,123 billion yuan, and 2.51 billion yuan, respectively; net profit to mother of 181 million yuan, 246 million yuan, and 317 million yuan respectively; EPS of 2.73 yuan, and 3.49 yuan respectively. Covered for the first time, giving a “Recommended” rating. Risk warning: The formulation business is the company's main source of revenue and is easily affected by the national centralized drug procurement policy.