Investment points 1. Well-known domestic lubricants and maintenance products enterprises, positioned in the middle and high-end, high-performing companies are well-known domestic manufacturers and service providers of lubricants and car care products, positioned in the middle and high-end markets. Their two major brands, Compton Lubricants and Luban Auto Maintenance Products, have a history of more than 20 years, focus on the automotive aftermarket, and have more than 600 first-class dealers, with full production and sales. Currently, the Qingdao Laoshan plant has a production capacity of 40,000 tons/year of lubricants, 20,000 tons/year of antifreeze, and 100 tons/year of automobile maintenance products; on April 28, 2017, the Qingdao Huangdao Industrial Park was opened, adding production capacity of 80,000 tons/year of lubricants, 20,000 tons/year of antifreeze, and 1000 tons/year of brake fluid. In 2012-2016, the company's net profit CAGR was 21.32%, of which automotive lubricants contributed more than 80% of gross profit. 2. The lubricant stock game, and the proportion of automotive lubricants has increased. Demand for high-end global lubricant consumption is mainly concentrated in the Asia-Pacific region. After a period of rapid development from 2001 to 2010, China's lubricant consumption entered a “low growth platform”. In 2016, China's lubricant production was 6.17 million tons, net imports were 250,000 tons, and apparent consumption was 6.42 million tons. There was a steady recovery, with a year-on-year increase of 10.68%, of which the proportion of automotive lubricants continued to increase. In 2016, the number of cars owned in China was 195 million, +19.63% over the same period last year, but the number of cars owned per 1,000 people was 102, far below the level of developed countries. Judging from the stage of international automobile development, China's automobile development is currently in the early stages of popularization, and there is still a lot of room for improvement. In the future, as the number of cars owned in China continues to increase, residents' living standards improve, the proportion of cars used in middle and high-end vehicles increases, and the increase and strict implementation of environmental protection requirements will drive up demand for middle and high-end lubricants. 3. In the era of lubricants 2.0, the “quality+brand+service” strategy seizes the market and maintains high gross profit. China's lubricant development has entered the 2.0 era. Repetitive excesses in the industry coexist with structural scarcity. Low-level price competition has changed to high-level value competition. In the future, it will no longer simply compare prices, but compare brands, comprehensive quality and service. Mid-range and high-end products with brand effects will enjoy price dividends and share more than 80% of the lubricant market's profits. The company is located in the middle of the industry and relies on the “quality+brand+service” strategy to seize the market and maintain high gross profit. Despite the sharp rise and fall in crude oil in 2011-2016, the company increased its proportion of high-end products, and the gross margin of automotive lubricants, the main product, increased steadily. From 2011 to 2016, the gross margins of automotive lubricants reached 24.27%, 25.70%, 28.96%, 30.47%, 35.48%, and 38.03%, respectively; the gross margins of industrial lubricants were 16.45%, 19.64%, 21.74%, 19.11%, 30.24% and 28.88%, respectively. 4. In the future, Huangdao Industrial Park has opened. To overcome the bankruptcy bottleneck, the Huangdao Industrial Park fully uses intelligent IoT and intelligent manufacturing systems. It was launched on April 28, and is expected to be officially put into operation on July 1. At that time, it will break the company's production capacity bottleneck and increase the company's profit level. 5. Investment suggestions: We expect the company's net profit for 2017-2019 to be 163 million yuan, 205 million yuan, and 252 million yuan respectively. Before dilution, it corresponds to EPS of 1.63 yuan, 2.05 yuan, and 2.52 yuan, PE 33X, 26X, and 21X. The 2017-2019 net profit CAGR reached 30.66%, maintaining the “recommended” rating. 6. Risk warning: Prices of raw materials and products have fluctuated greatly, and the commissioning and sales of new production capacity have fallen short of expectations.