Incidents: On August 30, 2016, the company announced its 2016 semi-annual report, achieving operating income of 525 million yuan, a year-on-year decrease of 39.67%; net profit attributable to shareholders of the parent company was 81 million yuan, an increase of 178.51% year-on-year; and net profit attributable to the parent company after deduction was 47 million yuan, an increase of 732.83% year-on-year. In addition, the company announced a plan to increase share capital from the Medium-Term Capital Provident Fund, transferring 20 shares for every 10 shares to all shareholders. Comment: Overall performance falls within the forecast range, and the overall divestment progress of the original business is in line with expectations. Nente Technology and Plastics B2B businesses have laid the foundation for future growth drivers to switch and maintain “buying”. We maintain the original recommendation logic. The company successfully promoted the development of the Vitamin E project and subsequent plastics B2B business on the basis of completing the divestment of the original household goods production and distribution business such as ceramics, bamboo, wood, glass, etc. In 2017, the Vitamin E business and the plastic B2B business are expected to contribute 750 million and 150 million in profits respectively. The company's profitability has improved dramatically, and “buying” has been maintained. The divestment of existing assets has accelerated, and Nengte Technology has achieved a perfect match between growth drivers, and the transformation attitude is firm. By business, the company achieved revenue growth rates of -44.31%, -82.18%, 22.70%, and -50.81%, respectively, for bulk trade, household distribution, pharmaceuticals and chemicals, and mining. At the end of 2015, the company divested all shares in 16 holding subsidiaries related to the manufacturing and distribution business of household goods such as daily-use ceramics, bamboo and wood products, etc., and commodity trade and transfer. In the first half of 2016, commodity trading and household distribution revenue decreased by 44.31% and 82.18% respectively, resulting in a sharp decline in the company's overall revenue. At the same time, the company's operating expenses were effectively controlled, and net profit increased significantly. The company's sales expenses for the first half of the year were 5.42 million yuan, a year-on-year decrease of 90.8%. Meanwhile, Nengte Technology, a pharmaceutical intermediates manufacturer acquired by the company in 2014, has seen steady growth in production and operation. It achieved operating income and net profit of 326 million yuan and 95 million yuan respectively during the reporting period, and is expected to achieve a performance promise of 220 million yuan in net profit throughout the year. The company divested its original assets to fulfill its promise in the company's 2015 annual report, and resolutely transformed the pharmaceutical and chemical industries, and achieved a perfect shift in growth momentum. The investment to build a 20,000 ton vitamin E project is in line with the company's main business position. Nengte Technology has strong R&D capabilities, and the expansion of new products increases room for imagination. Nengte Technology has strong research and development capabilities. From early montelukast sodium pharmaceutical intermediates to current tricresol and hydroquinone, etc., it has used technical barriers to build a moat. The company's investment in the construction of a project with an annual output of 20,000 tons of vitamin E is in line with the company's strategic position of R&D and production of pharmaceutical intermediates as its main business. In the vitamin E production project, Nente Technology has completed the technical conquest of two major raw materials, isophytoalcohol and hydroquinone. It has completed the first domestic production process for isophytol, has a unique synthesis route and successfully established a scale advantage on 2,3,5-trimethylhydroquinone, and has significant synergistic effects and cost advantages in entering the vitamin E production industry. Currently, the Vitamin E project is progressing smoothly. It is estimated that every 10 yuan/Kg increase in price (oil) after the project is put into production (5 yuan/Kg) will increase the company's performance by 141 million yuan, greatly increasing the company's profitability. According to our forecast of an average price of 55 yuan/Kg for the whole year of 2017, the vitamin E business is expected to contribute 750 million yuan in profits to the company in 2017. In addition, the company successfully put into operation the 120 tons of statine project, 100 tons of pentafluorophenol, 80 tons of NT02-8 project, and the PPO project with an annual output of 3,000 tons of o-cresol and 7,000 tons of 2,6-dimethylphenol in the early stages of the PPO project, and the expansion of new products increased room for imagination. 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: The company's performance in the next three years is mainly driven by the rapid release of vitamin E products, plastic rice market 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 a 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, maintain” “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.