Key points of the report The company focuses on viscose fiber, and the main business company is determined to increase the code, mainly engaged in the production and operation of viscose fiber and tap water. The company's predecessor was the Nanjing Chemical Fiber Factory, which was completed and put into operation in 1964. Currently, it has an equity production capacity of 148,000 tons of viscose staple fiber and 20,000 tons of viscose filament, and its comprehensive strength is at the forefront of its peers. The company announced a fixed increase plan at the end of 2016. It plans to raise no more than 1.5 billion yuan, and the majority shareholders subscribe no less than 200 million yuan, a ratio of not less than 34%. The capital raised will be used for a differentiated viscose staple fiber project with an annual output of 160,000 tons, further consolidating its position in the industry. Viscose staple fiber prosperity is rising, and the company's performance is at the most flexible demand side. Consumption upgrades drive domestic demand growth for viscose staple fiber. The apparent domestic consumption growth rate during the “12th Five-Year Plan” period reached 12.1%, higher than the yarn production growth rate during the same period; the depreciation of the RMB promoted export volume, and exports increased by 44.2% year on year from January to November 2016, and are expected to continue growing in 2017. On the supply side, after 2011, viscose staple fiber experienced a four-year slump, and the production capacity growth rate slowed markedly. In 2016, the domestic viscose staple fiber production capacity was about 3.9 million tons, and there was almost no additional production capacity in the industry in 2017. The introduction of the new “Environmental Protection Law” in 2015 has made industry regulations stricter, forcing small enterprises to quit, and the concentration of the industry will gradually increase. As an alternative, there is a slight substitution relationship between cotton and viscose staple fiber, and the price is partially linked. Cotton production is insufficient, the relationship between supply and demand has improved, and prices have bottomed out and rebounded, providing some support for the upward price of viscose staple fiber. At the price level, the industry ushered in a turning point in the second half of 2015. Prices fluctuated upward in 2016, reaching a high of over 17,000 yuan/ton. Currently, they remain above 16,500 yuan/ton. We judge that viscose staple fiber will continue to be prosperous in 2017. For every 1,000 yuan/ton increase in the price of viscose staple fiber, the company's EPS thickness increased by 0.31 yuan. The company targets emerging industries and carries out strategic transformation. The company's 2015 report proposed, “Through targeted additional distribution and other methods, new industries will rapidly develop new industries, and achieve 50% of the output value of new industries by 2020.” The company's fixed growth plan proposes that after the completion of the non-public offering, the company will actively expand new business in new materials and other fields on the basis of further expanding and strengthening the main viscose fiber business, 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. It is expected that the company will step up its transformation and upgrading efforts, and the subsequent layout is worth looking forward to. Investment suggestions: Giving a “buy” rating for the first time, viscose staple fiber continues to be booming, and the company is the most flexible; it is determined to increase the size of the main viscose staple fiber business to consolidate its leading position; in the context of the reform of state-owned enterprises, it is committed to developing the second main business and transforming into an emerging industry. The market capitalization is small, and the elasticity is high. The company's 2016-2018 EPS is expected to be 0.33 yuan, 0.90 yuan, and 0.99 yuan, giving it a “buy” rating for the first time. Risk tips: 1. The popularity of viscose staple fiber fell short of expectations; 2. The fixed increase project fell short of expectations; 3. Environmental risks.