We estimate that the company is expected to meet the sales target of 1.2 billion bottles per bag for infusion products in 2020.

It is expected that the recent epidemic in Hebei will have a limited impact on the company's operations, and the production and supply of drugs and materials will not be affected by the escalation of government control.

Reduce the target price based on the segment plus total valuation method to HK $5.9. The company's current valuation is attractive (13 times forecast earnings for FY21), flexible capital allocation, and maintain buy rating.

The volume of infusion recovered in the second half of 20 years, but the product price pressure remained.

With the continuous recovery of the domestic hospital end (the bed utilization rate has returned to about 90%, compared with 60% in the third quarter), the company expects to meet its sales target of 650 million bottles / bags of large infusion products in the second half of 20 years. At the same time, the company says its ampoule products are still growing rapidly (revenue rose 95% in the first half of 20 years compared with the same period last year) as hospitals become more receptive to the company's plastic ampoules and are gradually replacing competing products such as glass ampoules. Nevertheless, we believe that the overall gross profit margin level in the second half of 20 years is still under great pressure, mainly as follows: 1) the price of large infusion varieties included in volume procurement is under pressure (for example, the price of moxifloxacin injection was reduced by about 80% in the third volume purchase); 2) the European and American certification of API factories was delayed due to the epidemic, which hindered the sale of APIs in the second half of 20 years. As a result, we have lowered our adjusted net profit forecast for fiscal year 21 by 29% and 19% respectively to reflect the impact of global epidemic uncertainty.

We expect the company to return to the growth track in 21 years.

Management said the sales guidance for major infusion products in FY21 was 1.5 billion bottles per bag (up 20 per cent from the 20-year sales guidance). We expect the average price of products to remain stable in 21 years, because the income contribution of the varieties affected by collection is still small. We predict that the company's infusion revenue will reach 3 billion yuan in 21 years. In addition, sales of other products are also expected to grow rapidly in 21 years: 1) sales of ampoule products will reach 1 billion yuan (up 40% from the same period last year). Mainly benefit from the rapid release of new products (such as betastine, ropivacaine, doxophylline, etc.); 2) sales of raw materials will reach 550 million yuan, management said that the raw material drug factory has passed the EU certification, in addition, the certification of US regulators is also nearing completion. As a result, we expect the company's 21-year adjusted net profit to grow by 70% year-on-year.

Maintain the buy rating and lower the target price from HK $6.8 to HK $5.9

We have lowered the target price based on segment plus to HK $5.9, mainly reflecting: 1) the downward adjustment of the profit forecast due to the epidemic; and 2) the rolling of the valuation base period to 21 years. We expect the company's profit to grow at a compound rate of about 50% for the 2021-22 fiscal year, and with the current valuation of 10 times the 21-year forecast price-to-earnings ratio, we think the risk return is still attractive. Maintain the buy rating.