Key investment points The company has reached an inflection point, and the majority shareholders have subscribed and issued additional cash in full to support the development of the company's main business. The two-sided approach is to issue 100 million shares on a non-public basis to the majority shareholder Liuzhou Industrial Investment (the actual controller, Liuzhou State Assets), at a price of 4.6 yuan, to raise 46,000 million yuan in capital. After deducting issuance fees, they will be used for new product development and R&D center upgrades, marketing network system construction and brand communication, repayment of bank loans, and supplementary company liquidity. If the fixed energy increase is successfully implemented, the shareholding ratio of Liuzhou Industrial Investment will rise from 18.5% to 33.3%. The increase in shareholding ratio will help the majority shareholders continue to fully support two-pronged development. The new chairman took office, and there have been positive changes in fundamentals. In January 2013, Zhong Chunbin, chairman of Liuzhou Industrial Control, the majority shareholder, took over as Chairman of Liuzhou Industrial Control. Mr. Zhong has extensive experience and presided over Liu Gong's first cross-regional merger and restructuring. In May 2013, under the leadership of General Chung, the two-sided needle company, which had lacked new products for many years, launched a new two-sided traditional Chinese medicine pain-relieving toothpaste series with the highest retail price of 59.9 yuan, entering the middle and high-end toothpaste market. At the same time, its products were sorted out and upgraded to form a high-middle and low-end product line layout based on Pain Relief Three Bao (30-60 yuan), Yufang series (10-20 yuan), and ordinary traditional Chinese medicine toothpaste (10 yuan or less). The equity incentive commitments have begun to be communicated with the State Assets Administration Commission. If implemented, it will greatly stimulate the company's vitality. We believe that in the context of the rapid progress of state-owned enterprise reform, the two-sided approach, as a wholly competitive state-owned enterprise in the Japanese chemical industry, may usher in a comprehensive transformation of mechanisms, incentives, etc. In 2006, non-negotiable shareholders such as the Liuzhou State-owned Assets Administration Commission promised to launch a management incentive plan after the equity distribution reform was completed, but it was not implemented. There is no clear time frame for implementation of this commitment, and it does not comply with the relevant provisions of the Securities Regulatory Commission's “Regulatory Guide No. 4”. On March 4 and April 1 of this year, the “Notice Concerning the Commitments and Implementation of the Company and Related Parties” was issued twice. Among them, the April 1 announcement was different from the previous announcement in that it clearly stated that “the actual controller of the company, the Liuzhou State Assets Administration Commission, has also communicated with the company on matters of improving (equity incentives) commitments by holding a special meeting.” In other words, in just one month from March 4 to March 31, the long-overdue equity incentive matters began to be communicated and promoted with the State Assets Administration Commission. Local traditional Chinese toothpaste has risen, and the share of foreign investment has declined. In 2012, the toothpaste market had sales of 17.8 billion yuan, and the toothpaste market is expected to exceed 24.5 billion yuan by 2017. The top three brands Crest, Colgate, and Unilever (China) faced bottlenecks, and their market share continued to decline, falling from 48.6% in 2009 to 42.2% in 2012. The local traditional Chinese medicine toothpaste, Yunnan Baiyao, has risen strongly, and its market share has risen from 5.6% to 10.6%. The two-sided needle is the first traditional Chinese medicine toothpaste in China, and number one in the country for 15 consecutive years. Liuzhou Toothpaste Factory (the predecessor of a listed company) developed China's first traditional Chinese medicine toothpaste - two-sided needle medicinal toothpaste, pioneering traditional Chinese medicine toothpaste in China. In 1985, the annual production and sales of two-sided toothpaste exceeded 100 million sticks. By 2001, two-sided toothpaste remained the country's top 15 years in production and sales volume among similar products in China for 15 consecutive years. In 2002, the market share of two-sided needles was 16.3% (based on natural expenditure), making it the only local brand in the top 3 toothpastes. Focus on the main business and increase investment. It is estimated that within three to four years, the sales revenue of two-sided toothpaste will reach 8-10 billion yuan, and the market share will rise from 1.6% now to 3-4%, entering the second tier of the industry. (The sales volume of Yunnan Baiyao toothpaste in 2007-2010 increased rapidly from 290 million yuan to 1.21 billion yuan). After this fixed increase is completed, the company is preparing to invest 120 million yuan in media communication and brand promotion to enhance brand value and increase market share. Taking advantage of the company's “Chinese Herbal Oral Care Expert” brand, we are deeply involved in the field of high-end Chinese herbal toothpaste, and are actively developing high-end products such as the traditional Chinese herbal medicine pain relief series and the “Imperial Ginger Salt” series. At the same time, 60 million yuan was invested to transform marketing networks in key provinces, create model markets, replicate across the country with point-to-point bands, gradually complete the integration and transformation of the national regional marketing network, and achieve leapfrog development of the company in three to five years. The subsidiary Yancheng Jiekang is the second largest sucralose producer in the world, making good profits. Two sides hold 35% of the interest. Sucralose is a new generation of sweeteners. Currently, it has been approved for use in more than 120 countries, and the market is growing rapidly. In 2012, Yancheng Jiekang's production capacity reached 1,200 tons, net profit was 61.34 million yuan, and production was expanded to 1,500 tons in 2013, with a long-term planned production capacity of 12,000 tons. Currently, with the exception of Liuzhou Double Stitched Paper (loss) and Yancheng Jiekang, other subsidiaries have made small losses or profits, which has little impact on performance. In the future, the paper industry sector can turn losses or handle paper companies properly, and the company's profit can increase rapidly. We expect the revenue of the two-sided needle in 2013-2015 to be 1,268 million yuan, 1,426 billion yuan, and 1,716 million yuan, respectively, up 3.35%, 12.45%, and 20.32% year on year; net profit is 0.1 billion yuan, 34 million yuan, and 67 million yuan, up -30.29%, 244.09%, and 100.54% year on year; corresponding EPS is 0.02 yuan, 0.07 yuan, and 0.15 yuan. The market value is clearly undervalued, so investors are advised to pay active attention. Currently, the company's market value is only 2.14 billion yuan, and it has well-known daily chemical brands in the country. The balance ratio for the third quarter of 2013 was 37.58%, book cash was 320 million yuan, and financial assets such as CITIC Securities were worth 870 million yuan. After the fixed increase was completed, the majority shareholders injected 4.6 billion yuan, fully demonstrating the majority shareholders' confidence and support for the company. This time, the majority shareholders set a price increase of 4.6 yuan, and the current price is 4.74 yuan. The market capitalization is clearly underestimated, and the target price is 6.5-7 yuan. The first rating is “increase in holdings,” and investors are advised to pay active attention. Catalysts: Successful implementation of additional issuance projects; marketing reforms, divestment of loss-making assets; implementation of equity incentive commitments, and further comprehensive progress in state-owned enterprise reform. Risk warning: Additional distribution projects have failed to be implemented; promotion of new toothpaste has fallen short of expectations, and expenses have risen sharply during the new product promotion process, affecting the company's profits; assets such as the paper industry or continued losses have dragged down the company's performance; if production in the sucralose industry is expanded on a large scale, it may cause prices to drop sharply, affecting the company's profits.