Incidents: The company released its 2014 semi-annual report. The reporting period achieved operating income of 496 million yuan, a year-on-year decrease of 1.05%; net profit attributable to shareholders of the parent company was 29.85 million yuan, an increase of 3.34% over the previous year; and basic earnings per share of 0.05 yuan/share. Report summary: The company's production and operation situation in the first half of 2014 remained stable compared to the same period last year. After the price of AKD raw powder bottomed out, it began to gradually rise; the sales scale of other papermaking chemicals grew rapidly, and the cost of major raw materials rose, and gross margin declined; the sales revenue of pesticide intermediates maintained a relatively rapid growth; the API workshop was put into production, and the gross margin level was better and gradually realized; pharmaceutical intermediates were upgraded to API production workshops and large-scale production began, so the scale of production and sales of pharmaceutical intermediates declined sharply. The gross margin declined slightly, and the expense ratio increased over the period. The company's consolidated gross profit margin during the reporting period was 18.62%, down slightly from 18.85% last year. Among them, the gross profit margin of photogas derivatives was 34.76%, up year on year, while the gross margin of other businesses declined slightly year on year. The sales expense ratio, management expense ratio, and financial expense ratio were 3.88%, 7.62%, and 1.24%, respectively, with changes of 0.56, 0.87, and -0.3 percentage points from the same period last year. The cost rate for the period was 15.17%, an increase of 4.28 percentage points over the previous year. Adhere to the transformational health products route. In December '13, the company announced that it plans to jointly invest with Korea's Sungwoo to establish a joint venture subsidiary, Tiansen Health Products (Suzhou) Co., Ltd., to engage in health food production. Among the company's existing pharmaceutical ingredients, health products made with citicoline as a raw material can prevent Alzheimer's disease, and the market prospects in China are promising. In June 2014, the company purchased 21.16% of the shares of Suzhou Shenyuan Biotechnology Co., Ltd. with a capital increase. Shenyuan Biotech's main business is dendrobium officinale industrial research and development, biocompositional cultivation, ecological cultivation and deep processing, with good results. Profit forecast and investment value: The company's EPS (dilution) for 2014 and 2015 is expected to be 0.13 and 0.19, corresponding to the current stock price PE of 57X and 40X. Maintain the “Overweight” rating.