In the first two months of 2017, domestic methanol prices fluctuated at a high level, and began to loosen and fall in March. As the main production raw material of Sanjiang Chemical, higher methanol prices will squeeze the company's net profit in 2017. Therefore, we lowered our EPS forecast as follows: from $0.63 to $0.45 in 2017, $0.71 to $0.6 in 2018, and $0.73 to $0.67 in 2019. At the same time, we lowered our target price to HK$2.93. The current price has 18% upside from the target price, so we downgraded the rating to an increase. Costs are rising. In January and February 2017, the average price of mid-tier methanol in East China was 3,084 yuan/ton, which is significantly higher than the price of 1,816 yuan/ton in the same period in 2016, mainly due to tight supply due to maintenance of domestic and foreign methanol plants. Beginning in early March, methanol prices loosened and fell: from 3,110 yuan/ton on March 1 to 2,535 yuan/ton at present. As plant maintenance is completed and new production capacity is likely to be put into operation in May, we believe that the tight supply of methanol will improve. Compared with the average price of methanol of 2,074 yuan/ton in 2016, the current price is still high, which in turn puts pressure on Sanjiang Chemical's net profit in 2017. The price of the product. The factory price of Sanjiang Chemical's ethylene oxide rose from 9,300 yuan/ton in early 2017 to 11,100 yuan/ton in early March. However, starting in mid-March, the price of ethylene oxide dropped slightly. Currently, the factory price is 9,700 yuan/ton. The market price of polypropylene in East China fell from 10,050 yuan/ton in the first quarter to 8,908 yuan/ton on May 1 (the average price for the same period in 2016 was 7,030 yuan/ton). The price of ethylene glycol fell from 8,219 yuan/ton at the beginning of the year to 5,830 yuan/ton (the average price for the same period in 2016 was 5,114 yuan/ton). Increased product diversity. The commissioning of the MTO unit increased production of its main by-product, propylene, thereby further enriching the company's product composition. Generally, the market price of polypropylene is about 1,000 yuan/ton higher than propylene. In order to increase profit margins, Sanjiang Chemical's polypropylene plant was put into operation in July 2016, and all of the propylene produced by MTO was processed into polypropylene as a raw material. 50% of revenue in 2015 came from ethylene oxide sales revenue, but in 2016, due to increased production capacity for other products, this ratio dropped to 35%. Downgraded to an increase in holdings. Considering that higher methanol prices will weigh on the company's profits, we lowered our EPS forecast as follows: from 0.63 yuan to 0.45 yuan in 2017, 0.71 yuan to 0.6 yuan in 2018, and 0.73 yuan to 0.67 yuan in 2019. At the same time, we lowered our target price to HK$2.93, representing 5.8 times 17-year PE and 0.88 times 17-year PB, 4.35 times 18-year PE, and 0.75 times 18-year PB. The current price has 18% upside from the target price, so we downgraded the rating to an increase.