In the first quarter of 2010, Lu Kang Pharmaceutical continued to maintain a good momentum. Quarterly revenue was 588 million yuan, up 19.23% year on year, and net profit was 47.27 million yuan, up 855% year on year, over the whole of 2009. Contrary to the general impression in the market, the company's business is mainly pharmaceuticals, sales have changed to a division system, and investment has continued to increase. In 2009, pharmaceutical revenue accounted for 48%, and gross profit accounted for 70%. In 2009, the pharmaceutical business was changed to a division system, and sales investment in the first quarter of '10 increased by 73% year-on-year. The company's 21 pharmaceutical varieties have entered the “National Essential Drugs Catalogue”, accounting for 74.44% of total pharmaceutical revenue, benefiting from policies and significant volume; the new varieties, such as roglitazone and cefuroxime, have their own characteristics and have a foundation for rapid growth. The restructuring is the biggest opportunity for the company's API business. The company's important API products include: 7-ACA, macromycin, and semisynthetic penicillins. In October 2009, the company's 7-ACA enzyme process was implemented. In the context of the country's tightening of chemical law supervision, the volume and price of the company's products rose sharply; at the same time, efforts were made to adjust the product structure of semisynthetic antibiotics. The proportion of ultra-broad-spectrum penicillins such as meloxicillin and aloxicillin increased; the proportion of ultra-broad-spectrum penicillins such as meloxicillin and aloxicillin increased; and the supply gap caused by the cessation of production by Taipanomycin benefited from the supply gap caused by Puqiang's discontinuation of production. The company completed the acquisition of veterinary assets from Lu Kangang Group, and its position in the field of veterinary medicine continues to grow. The company Tylosin is the number one domestic brand; tryptophan is the domestic hegemon. It is one of only two domestic companies and the only exporter. After the acquisition and effective integration, the veterinary drug business has broad prospects and can be expected to grow. Risk factors: As the number of enzymatic 7-ACA manufacturers increases and production increases, prices may have a downside risk; (2) If pharmaceutical sales fall short of expectations, it will affect the company's performance profit forecast, valuation and investment rating: We predict that the company's 2010-2012 EPS will be 0.35, 0.46, and 0.58 yuan. The forecast assumptions are: (1) the 10-year pharmaceutical business will increase by 39%; (2) the 7-ACA annual average price will reach 850 yuan; (3) the veterinary drug business will continue to be integrated, and profitability will be released. Taking into account the company's market position in the industry and the growth rate of performance, a 35-fold valuation was given based on 10-year performance, with a target price of 12.25. A “buy” rating was given for the first time.