Summary of the report: Sinochem Rubber promises to prioritize the use of the company's products. The China National Chemical & Rubber Corporation holds companies such as Aeolus Tire, Huanghai Tire, Shuangxi Tire, and Guilin Tire. The announcement agreement promises to give priority to the use of the company's products. In the red sea competition of carbon black, the company's sales are guaranteed to a certain extent. It is proposed to build Jiaozuo Longxing, which will mainly supply a new plant for Aeolus tires, adding 120,000 tons of carbon black demand. With the additional production capacity of Aeolus Tire, there will be room for 120,000 tons of production capacity growth. At the same time, the steam power of the new plant can be matched with the use of exhaust waste heat from Jiaozuo Longxing. Production capacity will grow rapidly over the next two years. The company currently has a production capacity of 220,000 tons. All of the fund-raising projects will be completed and put into operation by the end of October 2011. At that time, an additional production capacity of 80,000 tons/year will be added to the total production capacity of 300,000 tons. At the same time, the company's total production capacity is expected to reach 420,000 tons by 2012, an increase of 91% over the current level. The gross margin is expected to remain around 20%, and the income tax rate will be reduced from 25% to 15% starting in 2010. The company's upstream coal tar will tend to rise in the future, and downstream tire companies will also suffer from rising costs. Overall, we believe that the gross margin of around 20% will be maintained. Also, since the company is recognized as a national high-tech enterprise, the income tax rate has been reduced from 25% to 15% since 2010, but the impact on performance in 2010 is still uncertain (subject to confirmation by the competent tax authorities). Performance forecasts and investment advice. We expect the company's EPS for 2010-2012 to be 0.40, 0.60, and 1.16 yuan/share, respectively, and the corresponding PE will be 35X, 23X, and 12X respectively. The company is in a traditional industry and cannot enjoy high valuations. Although the current valuation level has a certain advantage over the tire and carbon black sectors, the magnitude is limited. We gave an increase in holdings rating given the company's relative certainty in view of its growth.