Investment highlights: The company released its 2017 three-quarter report: operating income of 1,875 million yuan (YoY +2.80%) and net profit of 453 million yuan (YoY -10.47%) in the first three quarters, of which Q3 net profit to mother was 135 million yuan (YoY -21.51%, QoQ -2.88%). Due to environmental production restrictions and rising raw material prices, the third quarter results were slightly lower than expected. Environmental pressure in Jiangsu and Zhejiang increased in the second half of the year, and the company's commencement of construction was affected to a certain extent, and production could not be stabilized. At the same time, prices of major raw materials rose 5-20% year on year in the first three quarters, and some products such as insurance powder and liquid alkali rose by nearly 50%, leading to an increase in production costs. The gross margin fell to 46.5% from 51.3% in 2016. Prices for some of the company's products increased in the third quarter, but order execution was lagging behind, which will be reflected in the fourth quarter. The fourth quarter results are expected to improve sequentially. The advantages of industrial chain integration are obvious, creating a circular economy in the park. Intermediates are a key part of dye production and usually account for more than 50% of dye costs. The key intermediates required by the company in the production process are all produced and used in-house, have a complete product chain self-supporting system, and have significant cost advantages. At the same time, the company built its own sulfuric acid and cogeneration projects to build a circular economy system for the park, and future profitability is expected to increase further. Epitaxial acquisitions continue to be deployed, and the pigment market is expected to gain strength in the future. Since the company's main business has reached a bottleneck, it entered the field of anthraquinone solvent dyes through the acquisition of Daobo Chemical in 2015. With the development of pre-spinning coloring and inkjet printing and dyeing technology, the solvent dye industry grew by around 30%. Recently, the company announced that it plans to use its own funds to acquire 51% of the shares of Jiangsu Jiamai Chemical, a leading benzoyl chloride company, to further enrich its product line. At the same time, the company signed an “investment contract” with the Lianyungang Chemical Park Management Committee to carry out four phases of the project on 1,000 acres of land. Except for the first phase, the remaining three phases are all pigment projects, and are considering cooperation with other companies, and there are expectations for extended acquisitions in the field of pigments. The pigment market is expected to open up new space for the company's development. Profit forecast and rating: Due to the company's production phase being affected by environmental protection, the overall price increase of the product fell short of expectations. According to the revised profit forecast, net profit for 2017-2019 is estimated at 659, 848, and 893 million yuan (7.60, 10.54, 1.11 billion yuan before the reduction), EPS 1.14, 1.47, and 1.55 yuan, corresponding to PE 16X, 13X, and 12X. Maintain an “Overweight” rating. Risk warning: Product prices are falling, and new projects are falling short of expectations