In August 2002, China Ordnance Industry Group Corporation specialized restructuring of assets related to the production of nitrocellulose belonging to its wholly-owned subsidiaries, Luzhou North and Xi'an Huian, and established “Sichuan North Nitrocotton Co., Ltd.”; in September 2005, the entire company was changed to “Sichuan North Nitrocotton Co., Ltd.” The completion of the new project will increase the company's net profit by 132%. The IPO plans to implement four capital raising projects, namely the Xi'an base expansion and renovation project, the 15,000 tons/year high quality nitrocellulose ether project, the 11,500 tons/year PAC (polyanionic cellulose ether) project, and the R&D center construction project. After completion, the project will increase the company's annual operating income by 576.2 million yuan and net profit by 65.87 million yuan, which is equivalent to 101 percent of sales revenue and 132 percent of net profit in 2007. The compound growth rate of the civilian nitrocellulose market is over 10%. China is currently the world's largest producer and consumer of nitrocellulose, with a compound growth rate of over 10% in production and sales since 2000. With the improvement of product quality in the domestic nitrocellulose market, China's nitrocellulose exports have grown rapidly. Beihua Co., Ltd. has accounted for more than 70% of China's total exports for 3 consecutive years. The level of debt is low, and the financing policy is sound. In 2005 and 2006, the balance ratio of Beihua Co., Ltd. was about 36%, lower than that of ordinary chemical companies; in 2007, the balance ratio increased to 48% due to the acquisition of assets from major shareholders and an increase in the level of raw material reserves. If the capital raised is put in place, the tight financial situation of the company will be alleviated. According to the company's strategy, the company's financing policy will continue to be prudent in the future. It is conservatively estimated that net profit will increase by about 18% in 2008 and 2009. According to conservative estimates, the net profit of Beihua Co., Ltd. in 2008 and 2009 will increase by about 18%, respectively; if it is an optimistic estimate, the net profit will increase by more than 20%, respectively. After the fund-raising project is put into operation in 2010, net profit will increase by more than 30%. Single products are vulnerable to market fluctuations. Since more than 98% of the operating income of Beihua Co., Ltd. comes from nitrocellulose, if the nitrocellulose market changes drastically in the short term, it will have an impact on the company's business performance. Valuation benchmark: A reasonable valuation for the medium to long term is 13.50 to 14.00 yuan. Based on 2007 results, considering the company's high future growth, the number of shares issued is only 49.5 million shares, and the total number of shares is 190 million shares. It is a small-cap stock. According to the 2008 forecast performance PE value of 45 times and the 2009 PE value 40 times, the company's reasonable valuation in the medium to long term is 13.50 to 14.00 yuan/share. Pricing conclusion. In the early period, the premiums for small and medium-sized board companies on the first day of listing were more than 100%. Recently, market return expectations have been further reduced. Using a 70% premium rate, the median issue price based on a reasonable short-term valuation is 8.18 yuan. Considering the 2007 performance, due to the principle of prudence, it is recommended to quote 7.50 to 8.75 yuan.