Key investment events: On October 11, 2016, the company announced a phaniene supply agreement and long-term cooperation framework agreement with Amyris in the US. According to the farnene supply agreement, Nente Technology Co., Ltd., a wholly-owned subsidiary, enjoys the exclusive right to use farnylene products produced by Amyris in the US in the field of vitamin E. The procurement volume increased year by year from no less than 4,500 tons in 2016, and may not increase after 10,000 tons; in order to guarantee exclusive procurement rights, Amyris enjoys “excess benefit sharing” rights after 30% tax deduction for the portion of vitamin E sold above 65 yuan/kg. The long-term cooperation framework agreement includes: (1) 5 million US dollars to subscribe for 10 million Amyris shares (4%) in the form of warrants to launch a cooperative development plan for vitamin A and intermediates; (2) Guanfu provides Amyris with loans totaling no more than 25 million US dollars according to its business needs. Comment: An exclusive supply agreement and cooperation framework for farniene was signed with Amyris to ensure the VE project's competitive advantage and maintain the “buy” rating. Previously, we emphasized in our in-depth report “Guanfu Co., Ltd. (002102.SZ) - Overcoming Technological Bottlenecks and Entering the VE Industry, Next Year's Performance Is Expected to Explode” that the 20,000 ton vitamin E production project that the subsidiary Nente Technology is about to put into operation has significant quality and cost advantages. The two main raw materials, isoplant alcohol and 2,3,5-trimethylhydroquinone, have completed technical conquest of unique processes, and have successfully established a scale advantage in 2,3,5-trimethylhydroquinone. The exclusive supply agreement and cooperation framework signed with Amyris of the United States this time ensures the company's cost advantage in the field of vitamin E and the explosion of the business's performance in 2017, and the Vitamin A cooperation agreement further enhances the company's future imagination. The exclusive supply agreement for the global procurement of farnithene ensured the company's cost advantage in the field of vitamin E and helped VE's performance explode in 2017. As the only company in the world that produces farniene by fermentation (exclusive patent), Amyris announced in October 2015 that the production cost of farniene will be reduced to $1.75/L by modifying yeast to convert plant-derived sugars into various hydrocarbon molecules including farniene, which has significant advantages in fermentation technology such as farniene. The exclusive global procurement and supply agreement for farnithene signed with Amyris in the United States further guarantees the company's cost control advantage over isophytol, and the raw material cannot be sold to any other manufacturer of vitamin E and vitamin E intermediates. It is certain that Guanfu Co., Ltd.'s VE competitive advantage has not been overtaken in a short period of time. In terms of procurement volume, it is increasing year by year on the basis of not less than 4,500 tons in 2016. There will be no increase after 10,000 tons, which can fully meet the company's 20,000-ton VE production plan. Furthermore, the in-depth cooperation model of “excess benefit sharing” has further secured the exclusive right to use farniene. The Vitamin A cooperative development plan further enhances the company's future imagination. Under the long-term cooperation framework agreement, the company subscribed for 10 million shares of Amyris (4%) in the form of a $5 million warrant and launched a cooperative development program for vitamin A and intermediates. Amyris is a renewable products company leading the global industrial biotechnology revolution, and its synthetic biotechnology platform for genetically modified yeast is a world leader in technology. Vitamin A is also an oligopoly industry caused by technology accumulation, and the cost advantages brought about by breakthroughs in new technology can also directly benefit related enterprises. Based on the successful experience of farnylene and VE projects, we believe Amyris is likely to be able to successfully develop a low-cost, high-conversion rate vitamin A or vitamin A intermediate biofermentation strain and process. Once successfully developed, Advanced Technology will be the sole beneficiary of this achievement. In the long run, the company's dual business of pharmaceutical intermediates and plastics B2B will drive the company into a “new era” of growth model. Based on Nente Technology's future R&D product reserves, expectations that the company will develop B2B plastics business, and strong synergies between pharmaceutical intermediates and e-commerce platforms, we believe the company is expected to further open up market space and expand the company's revenue scale through cost advantages and sales channel changes. Profit forecast and investment advice: The company's performance in the next three years is mainly driven by the rapid release of vitamin E products, plastic rice mergers, and plastic B2B business. Without considering the increase in plastic rice city, we expect the company's operating income in 2016-2018 to be 7.90, 23.26, and 2,566 billion yuan, up -39.95%, 194.26%, and 10.34%, and net profit attributable to the parent company was 2.04, 7.01 and 875 million yuan respectively, up 5.53%, 243.64% and 24.88%, corresponding to EPS of 0.28, 0.96, and 1.20 yuan respectively; considering the increase in plastic rice city, we expect the company's revenue in 2016-2018. They were 7.90, 133.26, and 18.516 billion yuan, respectively, with year-on-year increases of -39.95%, 1585.98%, and 38.95%. Net profit attributable to the parent company was 2.04, 9.02, and 1,081 billion yuan respectively, up 5.52%, 342.09%, and 19.92% year-on-year. The corresponding EPS was 0.28, 1.00, and 1.20 yuan respectively. The company's current stock price corresponds to 2017 16×PE. Considering that the company has a lot of room for future development in the vitamin E sector, plastic rice city sector, and new materials sector, etc., the vitamin E business and plastic B2B business are expected to contribute 750 million and 150 million in profits respectively in 2017. The company's value is clearly underestimated, giving the company's vitamin E business 17 times PE in 2017 (technology breakthroughs enjoy valuation premium), 22 times PE for the pharmaceutical intermediates business, and 30 times PE for plastics B2B business. The corresponding target price is 20-22 yuan, maintained “Buy” rating. Risk warning: the risk of vitamin E price fluctuations; the risk of increased competition; the risk that the plastic rice city fixed increase plan will be uncertain; the risk that the company's vitamin E production and sales will fall short of expectations.