Matters: The company announced 16-year results: revenue of 2.29 billion yuan, the same year on year; net profit of 655 million yuan, a slight decrease of 1.58% year on year. Main opinion 1. Disperse dyes have declined a lot. Daobo Chemical's consolidated performance throughout the year The company's main profit comes from the three major dyes and a small amount of intermediates. In the face of a sharp decline in the major types of disperse dyes and dye intermediates, there has been a slight recovery in reducing dyes, and Daobo Chemical's overall performance has remained the same throughout the year as last year. The annual revenue of disperse dyes was 1.45 billion yuan (64%), a decrease of 9.7%, and gross profit of 900 million yuan (77.2%), a decrease of 9%. Among them (1) commodities: revenue of 1.04 billion dollars, a 10% decrease, gross profit margin of 60.3% was the same as last year; product prices continued to rise in the first three quarters, fall in the fourth quarter, with an average annual price of 67,700 yuan/ton, output of 156,000 tons; (2) filter cake: revenue of 4.1 billion yuan, a decrease of 9%, product prices continued to decline in the first three quarters, and supply began to rise in the fourth quarter due to the impact of G20 and environmental protection. Although the overall price declined, the cost was linked to oil prices, the decline was even greater, and gross margin increased by 1.6PCT to 67% from last year. The annual average price is 159,000 yuan/ton, and the output is 9090 tons. Reduced dyes (products and filter cakes) had annual revenue of 350 million yuan (15.5%), an increase of 25%, gross profit of 100 million yuan (9.13%), an increase of 22%, and stable prices throughout the year. Among them (1) commodities: revenue of 200 million yuan, same increase of 38%, gross margin increased by 3PCT to 27.8%, annual average price of 43,000 yuan/ton, output of 5,000 tons; (2) filter cake: revenue of 150 million yuan, the same as last year, gross margin decreased by 3.8PCT to 33.4%, annual average price of 102,000 yuan/ton, output of 3,962 tons. Solvent Dye is managed by Daobo Chemical, a wholly-owned subsidiary acquired in August 2015. Revenue in 2016 was 330 million yuan, which is basically the same as last year. Net profit was 49.87 million yuan, an increase of 5.8%, and has completed a performance commitment of 48 million yuan. Since 2015 only showed Daobo's performance since August, Daobo's contribution to the company this year is far greater than last year. The annual revenue of dye intermediates was 230 million yuan (10%), a decrease of 20%, and gross profit of 83 million yuan (7%), a decrease of 46%. Affected by the domestic economy, sales prices of major dye intermediates such as brominine and 1-amino-anthraquinone declined and rebounded in the fourth quarter. The average price for the whole year was 90,000 yuan/ton, with an output of 32,500 tons. 2. Period expenses were well controlled. Inventory increased due to seasonal stocking, and the quality of operating assets improved dramatically. The 16-year cost rate fell 0.5PCT to 17.1% compared to the same period last year. Among them, the management expense ratio fell by 0.4PCT to 14.6% compared to last year, and the sales expense ratio remained basically the same. Seasonal stocking led to an increase of 180 million yuan to 596 million yuan in inventory for the quarter, a sharp decrease in accounts receivable of 173 million yuan to 266 million yuan, net operating cash flow to 550 million yuan, and a significant improvement in the quality of operating assets. 3. Investment advice: After 16 years of inventory removal and consolidation in the dye industry, the industry's revenue situation improved in the first quarter of '17. The company's main dispersive anthraquinone dye is a high-end product, and its profitability and stability are superior to ordinary dyes. Furthermore, the 300,000 ton sulfur acid production project was put into operation in '17, and the thermal power project will be put into operation, which is expected to achieve a circular economy and reduce costs. We expect the company to make a profit of 800 million yuan and 940 million yuan respectively in 18-19, corresponding to EPS of 1.4 and 1.63, respectively. The current stock price corresponds to PE13 and 11 times, covering the first time, and recommended ratings. 4. Risk warning: poor downstream printing and dyeing demand