1. Overview of the incident. Recently, Chaohua Technology issued an announcement: The plan for controlling shareholders, directors, and executives to increase their holdings of the company's shares has been completed. 2. Analysis and judgment of the increase in shareholders' holdings shows that the company has broad potential for development and will benefit from the boom in copper foil, copper clad board, and PCB market 1. In this plan to increase their holdings, actual controllers, controlling shareholders and co-actors increased their holdings of the company by a total of 3 million shares, accounting for 0.33% of the total share capital, the financial director increased the company's shares by 214,700 shares, and the director increased the company's shares by 400,000 shares. 2. We believe that the majority shareholders and management have increased their holdings of the company's shares, indicating that they are optimistic about the company's prospects and have full confidence in the company's future development. The second half of the year is the peak sales season for mobile phones and new energy vehicles. The supply of copper foil and copper clad plates is tight, and demand continues to be strong, and it will enter a new cycle of price increases. The company successfully completed the commissioning of the 6-8um high-precision lithium-ion copper foil project. After completion, the company will have a production capacity of about 10,000 tons of copper foil. The release of production capacity for electronic substrates is compounded by a cycle of price increases, and the company's performance will enter a stage of continuous growth. Reiterate the view: The performance from January to September is expected to increase, and the electronic base materials industry continues to improve. The third quarter results increased sharply year on year 1. The third quarter results are expected to change in the range of 38769 million yuan to 13.876 million yuan, an increase of 178.45% to 896.69% over the previous year. The main reasons for the increase in 17Q3 performance are: the domestic market for electronic substrates such as copper foil and copper clad boards continued to be good, and revenue continued to grow; the company increased capital expenditure, and financing expenses increased in the third quarter, and net profit was affected to a certain extent. 2. We believe that the company will benefit from the “industrial chain integration” strategic layout and the investment of new copper foil production capacity, and that the month-on-month decline in performance in the third quarter will not change the long-term performance growth trend. Reiterate its views: the company plans to increase its main business, enrich the electronic substrate product structure, and is in line with the “vertical integration” strategy1. The company plans to raise no more than 883 million yuan. The main fund-raising is: a high-precision electronic copper foil project (phase II) project with an annual output of 8,000 tons, a construction period of 2 years; a high-end core board project with an annual output of 6 million sheets; a construction period of 1 year; and an FCCL project with an annual output of 7 million square meters, with a construction period of 1 year. 2. We believe that this fixed increase is in line with the company's PCB “vertical integration” strategy. It will expand and strengthen the company's main business, enrich the company's product line, effectively expand the production capacity of electronic substrates, continuously optimize the high value-added product structure, and provide “one-stop” services for downstream customers. The company has a competitive advantage in the layout of the entire PCB industry chain and rich experience in the production of standard copper foil. The construction of fund-raising projects will advance faster than before, and will benefit from the continued rise in the prices of PCB raw materials such as copper foil and copper-clad boards. 3. Profit forecasting and investment advice The company is a leading supplier of PCB industry chain integration. Benefiting from the expansion of lithium battery copper foil production capacity and the copper foil price increase cycle, its performance will continue to improve. Regardless of additional dilution, EPS from 2017 to 2019 is expected to be 0.10 yuan, 0.13 yuan, and 0.16 yuan. Based on the performance elasticity brought about by the price increase of copper foil and the release of production capacity, the company was given 75 to 80 times PE in 2017. A reasonable valuation for the next 12 months was 7.5 to 8.0 yuan, giving the company a “careful recommendation” rating. 4. Risk warning: 1. Implementation progress of fixed increases is lower than expected; 2. Prices of raw materials such as copper foil have fluctuated; 3. Competition in the industry has intensified.