Core opinion event: The company plans to build six high-dispersion white carbon black production lines in multiple phases. The total scale can reach 210,000 tons per year, with a total investment of 1.12 billion yuan. Among them, the first phase of the high-dispersion white carbon black project has an annual output of 35,000 tons, an investment amount of 210 million yuan, a construction period of two years, and an annual net profit of 42 million yuan after delivery. Comment: China's high-end white carbon black products need to be imported: white carbon black is a light-colored reinforcing material of rubber. After ultra-refinement and proper surface treatment, the reinforcing effect is even superior to carbon black. The concentration of the industry is low, and the average annual increase in production over the past five years has been 14%. Ordinary white carbon black is mainly used for rubber shoes, etc., and can be self-sufficient domestically; high-end white carbon black, including paint matting agents, etc., cannot be completely self-sufficient domestically and needs to be imported. Green tires are the main demand point in the future: adding a certain amount of white carbon black to ordinary tires can improve tire service life, improve adhesion and tear resistance, increase tire mileage, and at the same time enhance the tire's grip on the road surface to facilitate safe driving. The non-use of white carbon black is one of the reasons why the mileage of China's tires is lower than the international level. In the future, silica for tires will be the main growth point for market demand. Get rid of fierce competition from traditional business: The company's traditional business, carbon black, is in a state where supply exceeds demand and is fully competitive in China. At the same time, carbon black is a high-energy industry and will gradually be replaced by lower carbon and environmentally friendly products; upstream coal tar and downstream tire companies are being doubly squeezed, and profit margins are constantly being compressed. With the strengthening effect of white carbon black products, there is a trend of gradually replacing carbon black. Currently, the size of the carbon black market is around 3 million tons. If it is completely replaced by white carbon black, it will open up huge space for the white carbon black market. Of the listed companies, Ssangyong shares have a gross sales margin of more than 40%, which is far higher than the company's carbon black level of 17%. Therefore, the white carbon black business will shift the company from a model of profit based on scale and cost advantages to a model of profit based on technological advantages. Maintain a “Recommendation-A” investment rating. We assume that the company's white carbon black products will start production in 2012. The 2011-2013 EPS is 0.30 yuan, 0.48 yuan, and 0.66 yuan respectively, corresponding to the 2011 PE, which is 34 times higher. Compared with carbon black companies, the valuation is not cheap compared to carbon black companies, but the company's new production capacity over the next three years and changes in profit model will enjoy a higher valuation level and maintain a “recommended-A” rating. Risk warning: The process of replacing carbon black with white carbon black is slow, and market development is difficult.