Incident: The company released its 2017 semi-annual report. The company achieved revenue of 1,663 million yuan in the first half of the year, an increase of 24.76% over the previous year; achieved net profit attributable to shareholders of listed companies of 262 million yuan, an increase of 203.21% over the same period last year; and sold 1,58204 million sheets of various types of copper-clad plates, a decrease of 12.21% over the same period last year.

Profits more than doubled in Q2, and high growth is expected to continue throughout the year. Although the company's sales volume declined year on year during the reporting period, profit increased significantly; looking at the second quarter, the company achieved revenue of 818 million yuan in a single quarter, an increase of 15.27% over the previous year; achieved net profit attributable to shareholders of listed companies of 110 million yuan, an increase of 136.36% over the previous year; gross profit margin was 23.38%, -8.25% month-on-month, +4.47% year on year; the net interest rate was 13.39% -4.64% year-on-year +6.86%; indicating that the company's profitability was still excellent when the price level of the copper cladding industry fell in the second quarter. With the price of copper-clad plates rising again during the peak season in the second half of the year, the company's various performance indicators are expected to be further catalyzed to achieve growth exceeding expectations throughout the year.

The advantages of raw materials are gradually being highlighted, and the performance indicators are leading the industry. The company's fiberglass cloth business contributed 458.16,600 yuan in profit in the first half of the year, an increase of more than tenfold over the previous year, indicating how tight the raw materials market is. Glass fiber cloth accounts for about 30% of the cost of copper coated sheets. Currently, the company's glass fiber cloth production capacity is more than 80 million meters. Under the trend of rising prices, the company's supply of raw materials is guaranteed. In recent years, the company achieved industry leadership in various indicators such as gross profit margin, net interest rate, and per capita output value, and is beginning to show future leading potential.

Benefiting from the boom in PCB demand and domestic substitution trends, it can be expected that the industry will continue to be prosperous in the future. The pattern of copper-clad plates is relatively stable compared to the upstream and downstream industries. The price transmission mechanism is smooth, and the bargaining advantage is obvious. PCBs are in the golden period of “domestic substitutation+demand boom”, and the 500 billion market supports the growth space of upstream copper-coated plate manufacturers.

Investment advice: Net profit for 17-19 is expected to be 704/9.37/1,208 million, respectively, and EPS is 0.97/1.29/1.76 yuan respectively. The current stock price corresponding to PE is 19.9/14.9/10.9X respectively. The current stock price corresponding to PE is 19.9/14.9/10.9X respectively. The target price is 24.25 yuan, maintaining the “buy” rating.

Risk warning: The industry sentiment is lower than expected; the price trend of copper-coated plates is lower than expected;