Hongchang Electronics is a leading supplier of electronic grade epoxy resins in China. The company uses high-performance, environmentally friendly electronic-grade epoxy resin as its main product. Due to its excellent insulation, corrosion resistance, chemical resistance, heat resistance and adhesiveness, it is widely used in insulation and packaging in the electronics and electrical industries, as well as special anticorrosive coatings (mainly used in automobiles, ships, containers and food tanks), composites, etc. Specifically, it is divided into: (1) Electronic grade, used in circuit boards (copper-clad boards), accounting for 560% of the company's revenue. Major customers include Shengyi Technology and DuPont Group Co., Ltd. (2) Composite adhesives. (3) The anticorrosive material part has excellent insulating properties. Production capacity is expected to increase by the end of 2016. The main raw materials of the company's products are bisphenol A, epichlorohydrin, tetrabromobisphenol A and acetone. After going public, the company is committed to finding new processes and improving equipment, making costs lower and equipment more optimized. Although it is slow to start production, it is good for the company in the long run. The company currently has a production capacity of 70,000 tons, and is almost at full capacity. The Zhuhai project was completed at the end of 2016, adding 120,000 tons of production capacity. At that time, production capacity will reach 190,000 tons, making it the No. 1 epoxy resin production group. In view of the company's good sales channels and strong downstream demand, it is expected that sales will be strongly guaranteed after production capacity is invested. Competition for low-end products is fierce, and the pattern in the high-end field is relatively good. The company will gradually expand high-end products in the future. Currently, market competition is fierce, and product stability and delivery stability are the company's differentiated competitive strategies. The market share of the company's epoxy resin products in China is 8%, of which the market share of flame retardant epoxy resin for copper-clad panels is 15%. Major competitors are not listed, such as South Asia and Changchun Group in Taiwan. Strong domestic competitors include Miki (Jiangsu) and Yangnong Chemical. The epoxy resin market has a capacity of 1.2 million tons. Among them, environmentally friendly resins and fan blades are relatively high-end, and the gross margin is as high as 20% or more. Currently, it relies heavily on imports, and domestic production capacity is insufficient to meet standards. The company is making efforts to promote import substitution of high-end products, and high-end products will gradually be expanded in the future. Equity incentives will fully motivate company managers. The company announced in August that the number of restricted shares granted to company management shall not exceed 10 million shares, and the grant price is 4.59 yuan per share. The terms of exercise (1) will be no less than 10%, 20%, or 30% in 15-17 years based on 14 years. Or (2) On a 14-year basis, the market capitalization increased by no less than 10%, 20%, or 30% in 15-17. Or (3) 15-17, compared to the previous year, the reduction rate of the company's market value was not higher than 80% of the decline rate of the Shanghai Composite Index. Equity incentives will fully motivate company managers and benefit the long-term development of the company. The company was given an investment rating of “increase in holdings”, and the target price was 12.98 yuan. Hongchang Electronics is a leading supplier of electronic grade epoxy resins in China. In the later stages, high-end products will gradually be released, and the company is also considering transformation. We expect the company's 15-17 EPS to be 0.18, 0.20, and 0.27 yuan respectively, giving the company 64 times PE in 16 years, and a target price of 12.98 yuan for 6 months, giving it an “increase in holdings” investment rating. Risk factors: Market competition intensifies, and market development falls short of expectations.