The company is one of the leading POF heat shrinkable films in the world. Since its inception, the company has been committed to developing a series of new polyolefin shrink film products. at present, most of the series of products produced by the company are pioneered in China, and the product quality has reached the international leading level. it has become one of the most professional and largest polyolefin shrink film manufacturers in the world. POF heat-shrinkable film products can be subdivided into POF ordinary film, POF high-performance film, POF cross-linked film three categories and eight series. At present, the sales revenue and gross profit of these three categories of products are more than 95%, which is the main source of revenue and profit of the company. Heat shrinkable film belongs to the plastic packaging industry, and has gradually become the mainstream trend of the plastic packaging industry, while POF heat shrinkable film is the "darling" of the whole plastic packaging industry.

In line with the development of the industry, the main product structure optimization. In recent years, the competition of POF ordinary film products has become increasingly fierce, and the gross profit margin has decreased year by year, while the price and gross profit of high-performance films and cross-linked heat-shrinkable films are higher, which belong to the high-end products of POF films. In line with the requirements of the development of the industry, the company began to take the initiative to adjust the product structure, and took the lead in developing high-end products such as POF cross-linked film in China. With the continuous popularization of POF cross-linked film, its revenue proportion has exceeded that of POF ordinary film in 16 years. We believe that the continuous optimization of the company's product structure is still in progress to protect the steady development of the company's main business.

Invest in the construction of "high-performance functional polypropylene film trial production project", "thermoplastic high elastomer" and other projects to provide huge profit margins. The company announced on May 20, 2015 that in order to enrich and expand the company's product structure, the company intends to use its own investment to build a "high-performance polypropylene film trial project" to further optimize the product structure, form a good situation for the common development of high-performance functional polypropylene film and POF polyolefin heat shrinkable film, and enhance the company's sustainable development ability. And the company intends to raise no more than 400 million funds to invest in the construction of a thermoplastic elastomer project with an annual output of 120000 tons, with a construction period of 1.5 years and is expected to be in use in June 2017. The production project of thermoplastic elastomer materials with an annual output of 120000 tons is expected to achieve an average annual sales income of 2.96 billion yuan and an average annual profit of about 1 billion yuan, which will greatly enhance the profitability of the company.

Earnings forecast and rating: excluding SEO mergers and acquisitions, the company's EPS in 2016-2018 is expected to be 0.14,0.19,0.79 yuan respectively, and the corresponding dynamic PE is 119,87 and 21 times respectively, giving a "buy" rating for the first time.

Risk tips: the risk of lower-than-expected downstream demand, the risk that the progress of the thermoplastic high elastomer project is not as expected, and the risk that the pilot project of high-performance functional polypropylene film is not as expected.