Incident Jianxin Co., Ltd. announced an advance increase in its three-quarter report. Net profit attributable to the parent company is expected to be 21.3 million yuan to 22.5 million yuan in the 1-3 quarter, an increase of 48.75%-57.13% over the previous year. It is estimated that the third quarter of 2013 will achieve net profit of 17.21 million yuan, a year-on-year increase of 230%-254%, and a month-on-month increase of 2773%-2981%, that is, a quarterly increase of about 2.3 times year-on-year and a 27-fold increase over the previous quarter. This performance exceeded previous market expectations and reached a record high in profit in a single quarter since the announcement; at the same time, the performance confirmed the logic that the fundamentals of the industry and the company were on the upswing. Comment (1) There are four reasons why the company's performance increased dramatically: Reason 1: Fund-raising projects were put into operation and production capacity increased; Reason 2: Influenced by the national environmental protection policy, the main competitors of the company's old products in the industry have successively cut or discontinued production due to limited environmental processing capacity, which has further increased the market share of the company's products and increased product sales volume; Reason 3: Due to the increase in environmental treatment costs, labor costs, and fluctuations in raw material prices in the company's product production costs, the company raised the sales prices of some products, and the increase in sales prices was greater than the increase in production costs; Reason 4 :Since the third quarter, through scientific research and development and technological improvements, the company has continuously reduced production costs, increased product yield, and increased the gross margin of the company's products. (2) The company's investment logic, environmental inspections tend to be strict → small production capacity in the industry withdraws → industry concentration increases → product prices rise → leaders benefit, and the company's performance rises. Currently, the global market share of Jianxin Shares has reached 60%-70%, and it has strong pricing power for product prices; furthermore, the company's fund-raising production capacity has been fully put into operation, and it has the ability to replace the small production capacity market share that has withdrawn. Profit forecast and investment recommendations We estimate the company's EPS from 2013 to 2015 to be $0.45, $0.59, and $0.80, respectively. The following factors are comprehensively taken into account: (1) the company's dominant position in the “inter-amino industry chain”; (2) stricter environmental inspections and the continuous elimination of small production capacity; (3) the continuous expansion of downstream demand areas with high added value; (4) the commissioning of fund-raising projects to provide an increase in production capacity; (5) as industry concentration continues to increase, product prices in the amino industry chain are expected to rise. Based on this, the company was given a “buy” rating. Risk warning 1. Production pollution incidents; 2. Terminal demand continues to be sluggish; 3. Core product advantages disappear.