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The company released a report for the first three quarters of 2019, with revenue of 685 million yuan, an increase of 30.24% over the same period last year, a net profit of 77.46 million yuan, an increase of 24.34%, a deduction of 75.38 million yuan, an increase of 23.77% over the same period last year, and an EPS of 0.65 yuan. The company's performance was slightly lower than previously expected.

Of this total, 2019Q3 achieved a revenue of 229 million yuan in a single quarter, an increase of 24.19% over the same period last year, a net profit of 24.67 million yuan, an increase of 14.28%, and a net profit of 24.14 million yuan, an increase of 12.90% over the same period last year.

Peace viewpoint:

Under the influence of Torasemi's high base, the company's performance growth rate has dropped to a lower level: in the first three quarters of 2019, the company achieved an income of 685 million yuan (+ 30.24%) and a net profit of 77.46 million yuan (+ 24.34%), of which 2019Q3's quarterly income was 229 million yuan (+ 24.19%) and its net profit was 24.67 million yuan (+ 14.28%). We estimate that 2019Q3's API business revenue is about 20 million, excluding this part of the impact, the company's main business revenue growth of about 13%. We believe that the decline in the company's performance growth is affected by Torasemi's high base. As the competitive replacement comes to an end, Torasemi will return to industry growth of about 10 per cent and is expected to sell about 27 million units for the whole year. Second-tier varieties such as cefoxione and tegacycline are expected to maintain a high growth rate and are expected to become new growth engines.

High-end generic drugs have entered the harvest period, which is expected to provide a new growth point: the company's follow-up product reserves are mainly high-end generic drugs. Judging from the varieties that have been approved or are expected to be approved in the near future: although Changchun Xetine has been transferred out of the medical insurance catalogue, the actual market size is still about 3 billion yuan, and the company has no stock sales, which will bring pure increment after listing; Landilol is a new type of high heart selective β-adrenoceptor blocker, the future market space is more than 500 million yuan, the company is likely to harvest the first imitation, it is expected to bring considerable increment after 2019 approval. Rivashaban is the world's first oral Xa factor inhibitor, with global sales of about US $6.765 billion in 2018 and domestic sample hospital sales of 567 million yuan, an increase of 35.82% over the same period last year. The company is expected to become the first batch of listed companies. As a newer ADP receptor antagonist, Tegregrel has the potential to replace clopidogrel after it was incorporated into health insurance in 2017. The company is expected to go public in 2020, when it will grab a certain market share. In addition, the follow-up layout of the company also includes global heavyweight varieties such as Apexaban, Ezetimib, Tovaptan, Dabiga, Topatib and so on. The layout of high-end generics has entered the harvest period, and new varieties will be put on the market every year in the future.

With the introduction of NMS's new IDH inhibitor project, the follow-up collaborative development is interesting: the company signed a license agreement with NMS to introduce the small molecule IDH inhibitor project I111b, obtaining its global exclusive development and commercialization rights, with a project valuation of US $45.9 million and a down payment of 750000 euros.

Delivery of preclinical candidate compounds by 2020. IDH inhibitors are potential small molecule targeted drugs in recent years. At present, FDA in the United States has approved two IDH inhibitors, ivosidenib and enasidenib, developed by Agios Company, to be used to treat AML patients with IDH1 gene mutation and IDH2 gene mutation, respectively. The company introduced innovative drug varieties from NMS, which opened the prelude to the cooperation between the two sides, and greatly strengthened Haichen Pharmaceutical's innovative drug research and development capability. At the same time, the company plans to build a production base of innovative drugs and preparations in Anqing High-tech Zone, which is expected to form a two-wheel drive pattern of high-end generic drugs and innovative drugs in the future.

Profit forecast and investment rating: the company's performance growth has declined under the influence of Torasemi's high base. We downgrade the company's 2019-2021 EPS forecast to 0.86,1.01 and 1.24 yuan (the original forecast is 0.90,1.17,1.48 yuan respectively), and the current stock price is 33 times PE in 2019, maintaining the "recommended" rating.

Risk tips: 1) Core products are included in the scope of volume procurement: the winning varieties for the first time are on the ground one after another, and the second batch of varieties is opened in 2020. If multiple varieties are involved, it will have an adverse impact on the company. 2) R & D progress is not as expected: at present, the company has a number of R & D projects in the registration process, of which vinpocetine and randilol are expected to be approved in the near future, but drug review may be delayed due to uncertain factors such as policy. 3) merger and acquisition integration is not as expected: at present, NMS has launched the first round of financing to support projects under research, but there are still a large number of funding needs in the follow-up, if it can not be solved well, it will affect the integration and cooperation between the company and NMS.