Incident: On October 11, 2016, the company announced a farniene supply agreement and long-term cooperation framework agreement with Amyris of the United States. According to the Farniene supply agreement, the wholly-owned subsidiary Nengte Technology Co., Ltd. enjoys the exclusive right to use fanilene products produced by Amyris of the United States in the field of vitamin E, and the procurement volume will increase by 10,000 tons year by year from no less than 4,500 tons in 2016; in order to guarantee exclusive procurement rights, Amyris enjoys the “excess benefit sharing” right after 30% tax deduction for the portion of vitamin E sold above 65 yuan/kg. The long-term cooperation framework agreement includes: (1) 5 million US dollars to subscribe for 10 million Amyris shares (4%) in the form of a share warrant to launch a cooperative development plan for vitamin A and intermediates; (2) Guanfu provided a total loan of no more than 25 million US dollars to Amyris according to Amyris's business needs. Comment: An exclusive supply agreement and cooperation framework for farniene was signed with Amyris to ensure the competitive advantage of the VE project and maintain the “buy” rating. Previously, we emphasized in our in-depth report “Guanfu Co., Ltd. (002102.SZ) - Overcoming Technological Bottlenecks, and Next Year's Performance Is Expected to Explode”, that the 20,000 ton vitamin E production project to be put into operation by our subsidiary Nengte Technology has significant quality and cost advantages. The two main ingredients, isophytol alcohol and 2,3,5-trimethylhydroquinone, have all completed unique technical conquests, and have successfully established scale advantages on 2,3,5-trimethylhydroquinone. The exclusive supply agreement and cooperation framework signed with Amyris of the United States ensures the company's cost advantage in the field of vitamin E and a major explosion in the business's performance in 2017, and the vitamin A cooperation agreement further enhances the company's future imagination. The exclusive supply agreement for global procurement of fanilene ensures the company's cost advantage in the vitamin E field and helped VE's performance explode in 2017. As the only company in the world that produces farniene by fermentation (exclusive patent), Amyris converts plant-derived sugar into various hydrocarbon molecules, including farniene. In October 2015, it announced that it would reduce the production cost of farniene to 1.75 US dollars/L, which has significant advantages in fermentation technology such as farniene. The exclusive global procurement and supply agreement for fanilene signed with Amyris of the United States further guarantees the company's cost control advantage in isophytol, and the raw material cannot be sold to any other manufacturer of vitamin E and vitamin E intermediates, ensuring that the VE competitive advantage of Guanfu Co., Ltd. is not overtaken in a short period of time. In terms of procurement volume, it is increasing year by year from no less than 4,500 tons in 2016, and can no longer increase after 10,000 tons, which can fully meet the company's 20,000 ton VE commissioning plan. Furthermore, the deep cooperation model of “excess benefit sharing” further ensures the exclusive right to use farniene. The Vitamin A Cooperative Development Plan further enhances the company's imagination space for the future. Under the long-term cooperation framework agreement, the company subscribed for 10 million Amyris shares (4%) in the form of a $5 million share warrant and launched a cooperative development plan for vitamin A and intermediates. Amyris is a renewable products company leading the global industrial biotechnology revolution, and is a world leader in synthetic biotechnology platform technology for genetically modified yeast. Vitamin A also belongs to an oligopoly industry caused by technology accumulation, and the cost advantages resulting from breakthroughs in new technology can also directly benefit related enterprises. Based on the successful experience of the Farniene and VE projects, we think Amyris is likely to be able to successfully develop a low-cost, high-conversion rate vitamin A or vitamin A intermediate biofermentation strain and process, and once it is successfully developed, functional specialty technology will be the only beneficiary of this achievement. In the long run, the company's main business of pharmaceutical intermediates and B2B plastics will drive the company into a “new era” of growth model. Based on Nentite Technology's reserves of subsequent R&D products, the company's expectations for developing the plastics B2B business, and the strong synergy between pharmaceutical intermediates and e-commerce platforms, we believe that the company is expected to further open up market space and expand the company's revenue scale through cost advantages and sales channel changes. Profit forecast and investment advice: The company's performance over the next three years is mainly driven by the rapid release of vitamin E products, the merger of plastic products, and the B2B business of plastics. Without considering the increase in Sumi City, we expect the company's revenue in 2016-2018 to be 7.90, 23.26, and 2,566 billion yuan, respectively, with year-on-year increases of -39.95%, 194.26%, and 10.34%. Net profit attributable to the parent company was 2.04, 7.01, and 875 million yuan respectively, up 5.53%, 243.64%, and 24.88% with corresponding EPS of 0.28, 0.96, and 1.20 yuan respectively; considering the increase in sales in Sumi City, we expect the company's operating revenue in 2016-2018 to be 7.90 billion yuan, respectively , 13.326 billion yuan, and 18.516 billion yuan, year-on-year increase of -39.95%, 1585.98%, and 38.95%. Net profit attributable to the parent company was 2.04, 9.02, and 1,081 billion yuan, respectively, up 5.52%, 342.09%, and 19.92% year-on-year, and corresponding EPS was 0.28, 1.00, and 1.20 yuan, respectively. The company's current stock price corresponds to 16 x PE in 2017. Considering that the company has plenty of room for future development in the vitamin E sector, plastic rice city sector, and new materials sector, the vitamin E business and plastic B2B business are expected to contribute 750 million and 150 million profits respectively in 2017. The company's value is clearly undervalued, giving the company's vitamin E business 17 times PE in 2017 (technological breakthroughs enjoy valuation premiums), the pharmaceutical intermediates business 22 times PE, and the plastic B2B business 30 times PE. The corresponding target price is 20-22 yuan, maintaining a “buy” rating. Risk warning: the risk of vitamin E price fluctuations; the risk of increased competition; the risk of uncertainty over the Plumicine fixed increase plan; the risk that the company's vitamin E production and sales fall short of expectations.