1. Event Overview Recently, Lekai New Materials released the 2017 semi-annual performance forecast: net profit attributable to shareholders of listed companies was 470.6.26-52.2918 million yuan, down 0% to 10% from the previous year. 2. Analysis and judgment The interim report performance is in line with expectations, and future performance is expected to improve 1. During the reporting period, due to bottlenecks in production capacity, production and sales of major products such as thermal magnetic tickets declined slightly, and revenue and net profit declined slightly year-on-year. 2. According to the “Medium- and Long-Term Railway Development Plan”, by 2025, the operating mileage of domestic railways will reach 175,000 kilometers, of which 38,000 kilometers of high-speed rail will reach 38,000 kilometers; by 2030, the scale of national railways will reach 200,000 kilometers, of which the scale of high-speed rail will reach 45,000 kilometers. 3. We believe that as the first thermal magnetic ticket manufacturer in China, the company is also currently the largest thermal magnetic ticket manufacturer in China. In the future, with the expansion of railway scale, the increase in railway passenger traffic, and the continuous increase in the penetration rate of thermal magnetic train tickets, the company's thermal magnetic ticket products are expected to continue to grow. Production line expansion solves production capacity bottlenecks, lays out new material development, and is optimistic about the company's future prospects 1. The company's main business thermal magnetic ticket production capacity utilization rate in 2016 has reached 110%. In February 2017, the company launched the “Thermal Magnetic Ticket Production Line Expansion Project”. It is expected to be completed on December 31, 2018, and production capacity is expected to increase from 2,200 tons to 32,000 tons, an increase of 45.5%. At the same time, the company has invested heavily in research and development to actively expand the development of products such as decorative films, electromagnetic wave protective films for FPCs, and magnetic water treatment resins. 2. We believe that with the increase in the share of high-speed rail passenger traffic and the increase in orders, the new thermal magnetic ticket production capacity will lay the foundation for continued growth in performance. The expansion and extension of new products will open up new growth points for the company. 3. The profit forecasting and investment advice company is a leading enterprise in the domestic thermal magnetic paper and magnetic stripe industry. It is estimated that the company's EPS from 2017 to 2019 will be 1.01 yuan, 1.16 yuan, and 1.31 yuan respectively. Based on the company's industry position, the company will be given 35 to 40 times PE in 2017, and a reasonable valuation of 35.35 to 40.40 yuan for the next 6 months. It is recommended for the first time, giving the company a “highly recommended” rating. 4. Risk warning: 1. Decline in product prices; 2. Changes in railway ticket policies; 3. New product development falls short of expectations.