Hengfeng Paper focuses on the production and sale of thin specialty paper. Its main products are cigarette paper, filter stick paper, aluminum foil liner paper, etc. In 2011, the company's main revenue was 1,327 million yuan, net profit was 88.22 million yuan, and earnings per share were 0.38 yuan. It is the largest cigarette companion paper manufacturer in China. In April, Hengfeng Paper issued 450 million yuan of convertible bonds for three projects: an annual output of 6,000 tons of high-permeability filter rod molding paper, an annual output of 17,000 tons of Bible paper, and an annual output of 60,000 tons of special coated paper. Cigarette paper accounts for the largest share of the company's sales and is the most profitable type. Sales volume has been stable for the past two to three years, and is expected to increase as the company's new production line is put into operation. However, the supply in the industry is too high, and prices are under downward pressure under the influence of the country's product bidding policy. High breathability paper is the company's best-selling product at present. Due to the country's vigorous promotion of policies to reduce the harm caused by focusing, high breathability filter paper has become a relatively low cost choice for reducing cigarette tar. Market demand is strong, while domestic supply is small, so it can maintain a high level of profitability. Due to the large domestic production capacity of aluminum foil backing paper, prices have been under pressure for a long time, and the gross profit level has always been low. It is difficult to change the domestic supply and demand situation in the short term, so aluminum foil liners contribute little to the company. Performance forecast assumptions for 2012 and 2013: Year 12: Total sales volume of the company's products was 116,800 tons, an increase of 10,000 tons over 11, of which cigarette paper increased by more than 5,000 tons, high-transparency paper increased by 3,000 tons, aluminum foil liner and Bible paper each increased by more than 1,000 tons, and other paper decreased by more than 1,000 tons. In terms of gross margin, cigarette paper declined and high-permeability paper rose, with an overall increase of 0.37 percentage points. Year 13: Sales volume increased by 14,000 tons, and gross margin increased by 0.30 percent. Net profit for 2012 and 2013 is predicted to increase by 12% and 30% respectively, regardless of debt conversion and dilution of EPS of 0.43 yuan and 0.55 yuan in 12-13. A rating of prudent increase in holdings was given, with a target price of 8.50 yuan.