Investment points: The price of adhesives is rising rapidly, and the company is more flexible. Entering December, industry inventories fell to 5.3 days due to environmental rectification, compounded by downstream stocking demand. Against this background, the price of adhesives has risen sharply by more than 1,000 yuan/ton. Currently, the mainstream transaction focus in the market is 16,800 yuan/ton, compared to only 12,000 yuan/ton in the same period last year. We judge that as the peak season after the Spring Festival approaches next year, the price of adhesives will be on a larger scale, and the industry boom cycle is expected to continue until 2018. The company currently has a production capacity of 80,000 tons of viscose staple fiber and a 30% stake in Lanjing (Nanjing) (corresponding to 160,000 tons of production capacity), with a total equity production capacity of 128,000 tons. After divesting the real estate business, it is currently the purest A-share viscose staple fiber manufacturer, with great flexibility. The joint venture Lanjing (Nanjing) turned a loss into a profit, which is expected to contribute to performance elasticity. The company and the Austrian Lanjing Company, the world's largest producer of cellulose fiber, established a joint venture subsidiary of Lanjing Nanjing Fiber in China. The company holds 30% of the shares. In recent years, due to poor adhesive market conditions and management issues between China and foreign countries, Lanjing Nanjing has been in a state of loss all year round. Judging from the Nanjing Chemical Fiber Consolidated Report, investment income in joint ventures and joint ventures in 2012, 2013, and 2014 was -0.25, -0.34, and -36 million yuan respectively. However, as the company's operations improved and the adhesive industry's prosperity improved, it turned a loss into a profit in 2015, with investment income of 1.08 million yuan and 3.18 million yuan in the first three quarters of 2016. We believe that as the price of adhesives continues to rise, Lanjing (Nanjing) is expected to contribute more positive profits to the company. It is proposed to expand the production of adhesives by 1.5 billion yuan for the non-public sale, and the participation of major shareholders will increase by no less than 200 million yuan. The company announced on December 27 that it plans to privately distribute no more than 1.5 billion yuan for a differentiated viscose staple fiber project with an annual output of 160,000 tons. With a reserve price of 11.38 yuan/share, Xinkong Group, the majority shareholder, plans to participate in this non-public stock offering with no less than 200 million yuan in cash and ensure that the total share of the company's shares is not less than 34% after the issuance. We believe that this additional issuance will help the company increase its market share and consolidate its position in the industry, and that the majority shareholders' participation in the 200 million cash increase fully demonstrates confidence in the company's future development. Deepen the reform of state-owned enterprises and promote transformation and upgrading. The company is a state-owned listed company in Nanjing and a key enterprise in the industry. Through this project, it can give full play to the advantages of state-owned enterprises, lead “supply-side” reforms in the industry, expand and strengthen the company's main business, strengthen the scale effect, and enhance the company's core competitiveness. At the same time, the company proposed that on the basis of implementing the current non-public stock offering to raise capital investment projects, the company will actively expand new business in new materials and other fields according to its own development needs, promote the further transformation and upgrading of the company's business through mergers, acquisitions, restructuring, and asset injection, etc., and enhance the company's profitability. Profit forecasts and investment advice. We expect the company's EPS for 2016-2018 to be 0.31, 0.67, and 0.78 yuan. The average PE valuation level of comparable companies in the reference industry in 2017 was 17 times. We believe that the company is the purest and most flexible target in the adhesive industry. Sanyou Chemical, Aoyang Technology, and Zhongtai Chemical all have other businesses, so the company was given 25 times PE in 2017, with a target price of 16.75 yuan, and raised to a “buy” rating.