Key investment points Performance grew rapidly, and net profit doubled: in 2015, the company achieved operating income of 780 million yuan, an increase of 35.06% over the same period last year; realized net profit attributable to shareholders of listed companies of 78.011 million yuan, an increase of 97.83% over the same period last year; and realized net profit attributable to shareholders of listed companies after deducting non-recurring profits and losses of 75.9207 million yuan, an increase of 193.53% over the same period last year. All sectors grew well, and the herbal medicine and tablet business returned to healthy development: Chinese medicine preparations achieved revenue of 220 million yuan, accounting for 28.1% of revenue, an increase of 4.9% over the same period last year; chemical raw materials and intermediates achieved revenue of 190 million yuan, accounting for 23.7% of revenue, an increase of 28.4% over the same period last year; chemical pharmaceutical intermediates achieved revenue of 130 million yuan, accounting for 16.6% of revenue, up 13.6% over the same period last year; Chinese herbal medicines and Chinese medicine tablets achieved revenue of 220 million yuan, accounting for a share of revenue of 220 million yuan, accounting for a share of revenue 27.6%, an increase of 98.5% over the same period last year. The entire industry chain layout, and the extension is positive: the company acquired 100% of Dongli Enterprise Management's shares with a total price of 691 million yuan; invested 24 million yuan in Baohetang Pharmaceutical in Longxi to enter vulcanization-free production of local medicinal materials; invested 55 million yuan in Wannianzhang Pharmaceutical to enter into statin lipid-lowering drug APIs; and invested 10 million US dollars in the US biopharmaceutical company Kandmon to lay out biopharmaceuticals. Profit forecast and rating: We forecast that the 2016-2018 operating income of Jinghua Pharmaceutical (002349) will be 1.02 billion yuan, 1,411 million yuan and 1,693 million yuan respectively, and net profit attributable to the parent company will be 141 million yuan, 195 million yuan and 253 million yuan respectively. The equivalent EPS will be 0.50 yuan, 0.70 yuan and 0.90, respectively. The corresponding dynamic price-earnings ratios are 77.0 times, 55.5 times and 42.8 times, respectively. We forecast that the 2016-2018 operating income of Jinghua Pharmaceutical (002349) will be 1,102 billion yuan, 1,411 million yuan and 1,693 billion yuan respectively, and net profit attributable to the parent company will be 141 million yuan, 195 million yuan and 253 million yuan respectively, equivalent EPS to 0.50 yuan, 0.70 yuan and 0.90, respectively. The corresponding dynamic price-earnings ratios are 77.0 times, 55.5 times and 42.8 times, respectively. We believe that the company's traditional Chinese medicine formulations are of good quality and have large market space; strong sales capacity, optimized operating structure, and increased net interest rate; the products under development are of excellent quality and active deployment of biopharmaceuticals; the acquisition of Dongli in Nantong has increased performance elasticity, and major asset restructuring has added room for imagination, so we raised the company to a “buy” rating. Risk warning: R&D risk, policy risk, resource integration risk.