Incident: The company released its 18-year annual report. Revenue, net profit and net profit deducted from the mother were 4.403 billion, 506 million and 493 million, respectively, +14.56%, +33.20%, and +34.71%, respectively, lower than our expectations of 533 million yuan, mainly due to the impairment of the reputation of the pharmacy network. The profit distribution plan is to distribute 1 yuan for every 10 shares. The comments are as follows: Impairment of goodwill in 18Q4 affected profits, and OTC revenue has slowed. Revenue in 18Q4, net profit, and net profit after deducting non-net income were -5.46%, -6.61%, and -12.19%, respectively. The impairment of 18Q4 assets was 48.84 million yuan, of which the goodwill associated with pharmacy networks was impaired by about 42 million yuan, which is the main factor affecting current and 2018 profits. We estimate that the year-on-year decline in 18Q4 revenue was mainly due to the decline in pharmacy network revenue. However, the growth rate of OTC revenue also slowed during the same period (Jiangxi Renhe Pharmaceutical's 18H2 revenue was about +3% year-on-year). We estimate that this was mainly due to Jiangxi Renhe Pharmaceutical's high base of 17Q4 and the relatively good completion of 18H1, and appropriate commodity control in 18H2. OTC revenue in 2018 was +20% ~ 25% year-on-year, far higher than the single-digit growth of the OTC industry. The company's three largest commercial subsidiaries, Renhe Zhongfang, Jiangxi Renhe Pharmaceutical, and Renhe Zhonghe Pharmaceutical, and Renhe Zhonghe, had revenue of +24%, +15%, and +18% respectively in 2018. Overall, we estimate that the company's OTC revenue is +20% ~ 25% year-on-year. Among them, the total revenue growth rate of 17 gold single products is +40% ~ +50% year-on-year, and the overall scale is close to 1 billion dollars. We estimate the revenue growth rate of self-produced products is 25%-30%, and the revenue growth rate of branded products is 15% to 20%. In 2018, the revenue of the top five production enterprises was 24% year on year, and profit was +56% year on year. The five production subsidiaries controlled by the company, Jiangxi Pharmaceutical, Yaodu Renhe, Kangmei Pharmaceutical, Pharmaceutical and Health Products, Yaodu Zhangshu, and Tonggurenhe, had a total revenue ratio of +24% and a profit ratio of +56%. We estimate that this is mainly due to the increase in gross margin brought about product sales, increased production volume, and increased industrial capacity utilization after the company proposed a strategy to prioritize sales of its own products. In terms of financial indicators: The overall gross margin in 2018 was +4.05 percentage points year-on-year, mainly due to an increase in sales of high-margin OTC products and a decrease in the low-margin pharmacy business (pharmacy network); the sales expense ratio was 17.67%, +1.56 percentage points year-on-year, mainly due to the increase in the share of OTC business revenue with high sales expenses; the management expense ratio was 6.50%, -0.80 percentage points year-on-year, estimated to be due to a scale effect; financial expenses of 31.56 million yuan, the same period last year were -14.87 million yuan, mainly due to an increase in interest income, but considering the company After investing in the new factory in Zhangshu and the cannabis industry in '19, interest income is likely to decline in '19. The R&D investment was 51.17 million yuan, +87.11% over the same period last year. In 2018, the company promoted the research work of 16 classic recipes and the consistent evaluation and development of 6 key varieties. Asset impairment losses amounted to RMB 48.84 million, of which goodwill depreciation amounted to approximately RMB 42 million. Net operating cash flow was 569 million yuan, +14.38% over the same period last year. Diversify your business by entering the industrial hemp industry. On April 22, the company signed the “Renheyuan Industrial Cannabis Comprehensive Utilization Industry Demonstration Project Cooperation Framework Agreement” with the Qiqihar Municipal Government of Heilongjiang and Fengtai Fuqi. The company and Fengtai Fuqi set up a joint venture with a total project investment of 1.08 billion yuan, of which the first phase invested 108 million yuan. According to the framework agreement, the joint venture will begin construction of a demonstration base for industrial cannabis cultivation in May 2019, and agreed with the municipal government to reserve no less than 20,000 mu of land for cultivation in 2020. Maintain a “Highly Recommended - A” rating. We expect the company's net profit growth rate from 2019 to 2021 to be 26%/20%/17%, respectively, and the corresponding EPS is 0.51/0.62/0.72 yuan, respectively. As a leading OTC enterprise, the company has a rich variety and strong brand power. After the formation of a local promotion team, it ushered in an era of OTC terminal sales control, and sales are expected to continue to grow rapidly; after the product revenue ratio expands, profitability is expected to increase markedly. Currently, the PE valuation corresponding to '19 is around 17x, maintaining the “Highly Recommended - A” rating. Risk warning: M&A progress falls short of expectations, product sales fall short of expectations, product quality and regulatory risks.