Key investment points benefit from the King Kong Line replacement transformation. The short to medium term gap is huge, and core companies benefit. Technologies such as black silicon and PERC have solved the flocking process after diamond wire has been cut, and the cost has been greatly reduced while improving battery usage efficiency. It is estimated that the penetration rate of diamond wire will reach more than 90% by the end of 2017, leading to a blowout development in the application of diamond wire in multi-chip cutting. We expect global shipments of 80 GW photovoltaic modules in 2017, with mono/polysilicon accounting for 25% and 65%, respectively. The demand for diamond wire is about 24.4 million KM, while the sapphire substrate industry requires 4 million to 5 million KM, the total demand is 28.4 million to 29.4 million km. The current total production capacity is only 19 million kilometers, and the gap is heavily dependent on imports, and the profitability of core companies in the industry is strong. Based on an annual increase of 10 GW of photovoltaic module production and a 30% growth rate of the sapphire industry, the demand for diamond wire in 2018 and 2019 was 30.1 million KM, respectively. It is estimated that all production expansion projects in 2018 will reach a total production capacity of about 30.58 million KM after delivery, so there is a basic balance between supply and demand. The “strong are always strong” in the King Kong wire industry, and the market share of leading companies continues to increase. We have determined that there are certain barriers to entry into the industry. Currently, strong players who have been deeply involved in the industry for many years can use technology and capital advantages to take the lead in investing in the industry. The TOP5 market share has increased from 16% to more than 65%, obtaining “double improvement” opportunities brought about by increased industry penetration rate and import substitution. As the core consumables for slicing, King Kong wire requires repeated adjustments and run-in during the cooperation process with slicing users to obtain excellent yield and higher efficiency. Once shaped, it is difficult to change suppliers, and the customer has high viscosity and forms a “strong person is strong” pattern. The company's production capacity was quickly released to share the King Kong Line feast. The company's IPO fund-raising project “Diamond Wire Saw with an annual output of 1 million km” will be released in the third quarter through early investment. The production capacity is expected to reach more than 2 million KM by the end of 2017, and the new production capacity is 60um-45um, the main electroplated diamond wire for future polysilicon slices, which has strong market competitiveness. We expect the company's production capacity to reach 1.47 million and 2 million KM in 2017-18, conservatively forecast annualized production of 1 million km and 2 million KM, and contribute about 280 million/55 million yuan and 420 million/82 million yuan in revenue and net profit. Continue to advance in research and development to build core competitiveness. Forward-looking product development and innovation is the foundation for the company to achieve long-term sustainable development. 2017H1 invested 5.33 million yuan in R&D expenses, an increase of 34% over the previous year, and has accumulated 40/7 authorized patents/newly applied patents (including 8/6 invention patents), and has achieved phased breakthroughs in key products such as reduction wheels, dicing knives, and CMP-DISK. Companies, including Diamond Wire, have always relied on independent research and development to take the lead in industry development. R&D genes are the company's core competitiveness and the cornerstone of continuous growth. Risk factors: The speed of diamond wire replacement in the photovoltaic industry falls short of expectations, changes in industrial policy, etc. Profit forecasting and valuation. The company is one of the leading diamond wire companies in China. The diamond wire cutting industry has taken advantage of the rapid growth of Dongfeng PV. The company's IPO expanded production capacity in 2017, and the performance flexibility is huge. We are temporarily maintaining the business's 2017-19 net profit forecast of 65 million/94 million/110 million yuan. The 3-year CAGR is 43%, and the basic EPS after the revised share capital is 1.26/1.80/2.12 yuan (originally 1.66/2.36/2.79 yuan), corresponding PE is 45/32/27 times; we are optimistic about the company's extremely high performance flexibility and leading premium brought about by the increase in industry concentration in the future, giving the company 40 times PE in 2018, increasing the target price to 72.00 yuan to maintain the “buy” rating.