Under the influence of the possible future catalogue of hierarchical Management of Antibacterial use (hereinafter referred to as the Management Catalog), the antibiotic industry is facing unprecedented challenges. The terminal advantage of the original high-end products is no longer available. After the restrictions on use, it means that many products are very likely to withdraw from some high-end markets, while low-end products are difficult to sell at a small profit, and the profitability of the industry is facing an inflection point.

From an industry point of view, the share of anti-infective drug sales has dropped from 30.73% in 1999 to 23.10% in 2010, while the management catalogue will once again cause industry shock. Although the current policy has not been introduced, the industry as a whole has begun to accelerate change, mainly reflected in:

Downstream dealers began to reduce orders and avoid inventory as much as possible. Some hospitals have begun to restrict the use of antibiotics, and the use and variety of antibiotics have dropped significantly.

From the company level to the current sharp decline in sales of high-end antibiotics, many of the original dominant varieties are facing a reshuffle, and small companies begin to plan for transformation.

Those with abundant funds distribute the market at a loss, such as North China Pharmaceutical, while small and medium-sized antibiotic manufacturers are thinking about how to minimize the risk.

We judge that the restriction on the use of antibiotics in the future is still a high probability event. we summarize that the listed companies with the greatest impact at present are as follows: 1. The antibiotic product is single and the profit source is limited to one or some products. For example, the second or third generation of cephalosporins antibiotics; 2, the products mainly rely on the domestic market, coupled with the low threshold of antibiotic technology, production capacity expansion will soon reduce the profit margin of the industry, and the market fluctuates greatly. 3. The management system can not be followed up in time, and the position of the company is vague. 4. The ship disaster turns around, and the larger the scale of antibiotics, the greater the policy impact.

Due to the influence of the management catalogue, we expect that the company will have a great impact on the sales of raw materials and antibiotic preparations this year, in which the price of 7-ACA continues to hit a new low. At present, the price in some areas has fallen below 550yuan / kg, mainly due to the sharp decline in downstream demand and the sharp decline in the price of downstream products, mainly due to the continuous decline in the price of ceftriaxone sodium and the serious expansion of production upstream. In addition, Federal Pharmaceutical and Huayao are expanding production, with a production capacity of nearly 7600 tons, which has nearly doubled compared with last year. Although all production capacity has not been fully realized at present, the price has dropped significantly, and the current price is already close to the cost bottom line. Considering the downstream and production capacity, we expect that the possibility of 7-ACA price rebound for the whole year is relatively small.

In contrast to antibiotics, the company's current veterinary drug sales remain exuberant. from the national sales value of veterinary drugs from January to June 2011, national sales increased by 32.84% year on year, and the industry maintained a trend of rapid growth. we expect that the operation of high pig prices is expected to continue until the Spring Festival, while feed sales are expected to remain high throughout the year, so we expect the company's veterinary drug sales to grow by more than 40% for the whole year.

We adjust the company's profit forecast, and it is estimated that the company's operating income in 2011-13 will be 2.734 billion yuan, 2.825 billion yuan and 3.157 billion yuan respectively, an increase of 24.5%, 3.3% and 11.8% respectively over the same period last year, and the net profit belonging to the parent company is 120 million yuan, 145 million yuan and 172 million yuan respectively, up-7.24%, 20.74% and 18.42%, respectively. The EPS of the corresponding company is 0.21,0.25,0.30 yuan respectively, continuing to maintain the "hold" rating.