Report summary: In the first half of 2017, the company achieved operating income of 810 million yuan, an increase of 31.25% over the previous year, and realized net profit of 55.31 million yuan, a year-on-year decrease of 27.86%. The company's performance forecast for the first three quarters was 7533.35 to 107.6193 million yuan, a year-on-year decrease of 30-0%. This is mainly due to the rise in raw material prices and the decline in product gross margin. Polyester powder leader, stable market position. The company's main chemical business is polyester resin for powder coatings. It currently has a production capacity of about 150,000 tons, a domestic market share of 25%, and a stable leading position. The company achieved quarterly revenue of 469 million yuan in the second quarter, an increase of 29% over the previous year; net profit of the mother was 32.38 million yuan, a decrease of 32% over the previous year. The main reason is that raw material prices rose more than product prices, and resin gross margin fell sharply to 15.5%, down 8.6 percentage points from the same period last year. The upstream layout has outstanding advantages, and has gone abroad to the next level. The company's 50,000 tons of polyester resin for powder coatings and 40,000 tons of neopentylene glycol projects are under construction. Production is expected to be completed in December this year. After full production, the company's total polyester resin production capacity will reach 200,000 tons; in the first half of the year, Shandong Lihuayi Shenjian's 30,000 tons of neopentylene glycol have already been put into production, and by next year, the new pentylene glycol will be basically self-sufficient, enhancing the company's resilience to risks. At the same time, the company is actively expanding overseas and plans to build a 40,000-ton polyester resin plant and R&D center in Spain. Excalibur shares currently account for about 20% of overseas revenue, and gross margin is far lower than domestic. The establishment of a Spanish factory will help the company absorb overseas management and technical experience, enhance international competitiveness, and open up overseas markets. The military sector has been stepped up, and the two main industries have gone hand in hand. At the end of 2015, the company acquired Jiaye Airlines and entered the field of high-end equipment manufacturing; during the reporting period, the company completed the acquisition and transfer of Zhongxing Weiye. The company has four complete military qualifications, is a second-level classified unit, and will become the company's business platform in the military industry in the future. During the reporting period, the subsidiary Jiaye Airlines achieved operating income of 96.26 million yuan, an increase of 31% over the previous year; achieved net profit of 20.95 million yuan, an increase of 44% over the previous year, showing a good development situation, and is expected to successfully complete the annual performance commitment of 51 million yuan. The company's layout in the military industry is beginning to bear fruit, and the development of the dual main industries of military and chemical industry dominates the lead. Profit forecast: The company is expected to achieve net profit of 1.69/211/234 million yuan in 2017-2019, corresponding to PE 36/29/26 times, giving it an “increase in holdings” rating. Risk warning: Project progress falls short of expectations; raw material prices have risen sharply.