Key investment points: A leading enterprise in LCD substrate glass. The background advantages of state-owned enterprises have enabled the company to receive a lot of local support. The company's main business is R&D, production and sales of LCD substrate glass. LCD substrate glass is an indispensable key material for the flat panel display industry, and is an important component of LCD panels. The company has production bases in Hefei, Zhangjiagang, and Xianyang. Localized support has strong geographical advantages, and has deep cooperation with local governments, and received a lot of capital and policy support. The 6th generation line brings profit, and the 8.5 generation line will support the company's future performance growth. The company's 6th generation line has already entered trial production, and it is expected that large-scale shipments will bring profit to the company. Through independent research and development and technical cooperation, the company has mastered the equipment technology and production process technology of the 8.5 generation LCD substrate glass production line. The construction of the 8.5 generation LCD substrate glass production line project is scheduled to begin in the second half of the year. Preliminary preparations are currently under way. Currently, there is less competition for the 8.5 generation line, and it is expected that the price drop will not be as intense as the 5th generation line after production is put into operation. The 8.5 generation project is expected to have a gross profit margin of about 30% at the beginning of production in the second half of next year, which will enable the company's main business products to change from loss to profit. Production on the 5th generation line, which affects performance, will gradually be discontinued or converted, and losses are expected to stop. The company's current 5th generation line yield is around 80%, which is already a good level. However, the increase in yield is not enough to make up for the impact of falling prices on glass substrates. The company plans to stop production of the 5th generation line. After the shutdown, the company's loss situation will improve, and the company will dig deeper into the potential to convert the 5th generation line to glass covers. There is not much difference in the process related to conversion, so it is expected that the 5th generation line factory will turn a loss into a profit. The company is managed by CEC, the largest state-owned electronics industry group in China, and there are strong expectations for future state-owned enterprise reform. Since 2012, the company's management authority has been transferred from the State Assets Administration Commission to China Electronic Information Industry Group Co., Ltd. (CEC). The CEC owns a large number of listed and unlisted companies related to the electronics industry. In the context of state-owned enterprise reform, the company is a listing platform under the CEC, triggering strong speculation about state-owned enterprise reform. Profit forecast. (1) We expect that until the 6th generation of the company makes a profit in 2017, the company's performance will still be seriously affected by the loss of the 5th generation line. (2) We expect that 2017 will be the starting point for the company from loss to profit. Since then, the profit situation has gradually improved with the help of the 8.5 generation line (3) considering the company's state-owned enterprise reform expectations as a listing platform under the CEC. Overall, we expect the company's net profit from 2016 to 2018 to be -2.53, -0.09, and 27 billion yuan, respectively, and the corresponding EPS of -0.34, -0.01, and 0.04 yuan/share, respectively. The company's net assets per share in 2015-2018 were 2.12, 2.15, 2.14, and 2.18 yuan, giving the company 6.5 x PB in 2015, corresponding to the target price of 13.97 yuan. It was covered for the first time, and a “increase in holdings” rating was given. Uncertainty analysis. Competition for glass substrates has intensified, and prices have declined further.