1. Overview of the incident On the evening of October 18, Zhengye Technology issued an announcement: It intends to issue no more than 39,421,554 shares in non-public shares and raise a total of no more than 927.484 million yuan in investment: intelligent equipment manufacturing projects, FPC functional film material expansion and technological transformation projects, headquarters building construction projects, and R&D center construction projects. 2. Analysis and judgment of the expansion and transformation of high-end LCD modules, lithium batteries, and elevator intelligent equipment. The downstream market is vast 1. The company plans to invest a total of 416.7397 million yuan (plans to use raised capital of 333.963 million yuan) in the intelligent equipment manufacturing center project. The project will be used to invest in the expansion of production and technological transformation of high-end LCD module intelligent equipment, lithium battery intelligent equipment and elevator intelligent equipment. The construction period of the project is 18 months. After delivery, it is expected to achieve an average annual sales revenue of 607.63 million yuan and an average annual net profit of 126.1383 million yuan. 2. Downstream demand for domestic intelligent equipment is strong: 1) In terms of display, high-end flat panel display technologies such as OLED and high-generation LTPS continue to penetrate the market. Huawei, OPPO, and vivo all have flagship machines using OLED displays; according to UBI Research forecasts, global OLED panel shipments will increase to 1.7 billion pieces in 2021, 5.67 times that of 2016; 2) In terms of lithium battery manufacturing, according to the forecast of Gaogong Lithium Battery Industry Research Institute, by 2020, domestic lithium battery equipment will reach 28.5 billion yuan The localization rate will increase to about 80%; 3) In terms of elevator manufacturing, according to statistics from the China Industrial Information Research Network, as of the end of 2015, the number of elevators per 10,000 people in China was only 32, 1/2 of Japan and 1/4 of Germany. 3. With the advent of the full-screen trend, OLED penetration rate continues to rise, and downstream demand for high-end screen modules continues to grow, and upstream related intelligent equipment manufacturing is expected to continue to benefit; new energy vehicles are becoming the future development trend in the world, demand for lithium batteries for electric vehicles is growing rapidly, consumer electronics are developing in the direction of high added value such as fast charging and high capacity, and downstream lithium battery manufacturers' demand for upstream equipment will continue to expand; as China's new urbanization advances, elevator usage and penetration rate will further increase, and its equipment demand is expected to continue to expand. FPC uses functional film materials to enrich product types, develop new products and technologies, and enhance the company's core competitiveness 1. The company plans to invest a total of 209.106 million yuan (it plans to use the capital raised to 1809.04 million yuan) for FPC functional film materials expansion and technological transformation projects. For the production of covering films, battery shielding films, adhesive/double-sided substrates, and glue-free double-sided substrates, etc. FPC manufacturers need to purchase raw materials. The construction period of the project is 18 months. After delivery, it is expected to achieve an average annual sales revenue of 38,003.42 million yuan and an average annual net profit of 42.7371 million yuan. 2. Consumer electronics products are trending towards miniaturization, refinement and portability, and the global FPC market space continues to expand. According to WECC statistics, the FPC output value in mainland China in 2015 was US$5.681 billion, accounting for 47.97% of the world. According to Prismark's forecast, the mainland FPC market is expected to continue to grow in the future, and the revenue CAGR growth rate from 2016 to 2021 is expected to reach 7.6%. 3. The company's core management technology team has rich experience in the FPC industry. Currently, there are about 30 professional technicians engaged in the research and development of functional film materials. It has mastered core technologies such as ink technology and conductive adhesive technology for the production of functional film materials for FPC, and has high-end film materials such as covering films and release films. 4. After the completion of the project, the company will provide downstream customers with more comprehensive products and services, reduce customer procurement costs, and meet customers' one-stop procurement needs; at the same time, the company will improve the technical level of FPC-related products, further enhance the added value of products and the company's overall competitiveness, and lay the foundation for future development. The field of intelligent equipment is rich in technology reserves and high-quality downstream customers. This fixed increase will solve the bottleneck in production capacity. The company has deep production experience and technology in the field of intelligent equipment, and has accumulated rich high-quality downstream customers in the three fields of LCD modules, lithium batteries, and elevators. The high-quality customer base will lay a good market foundation for future intelligent equipment sales. This fixed increase targets production capacity in the field of high-end equipment and materials, and will effectively solve the company's production capacity bottlenecks. Enhance R&D capabilities, improve R&D environment and equipment, and enhance customer stickiness The company plans to invest a total of 176.71443 million yuan (of which it raised capital of 107.8874 million yuan) in the R&D center construction project, with a construction period of 18 months. The company has an advanced R&D team, and industry-university-research cooperation is close. Investment in the R&D center will further enhance the company's R&D strength, enhance customer stickiness, and lay the foundation for the company's long-term development. 3. Profit forecast and investment recommendations The company's business benefits from the rapid development of domestic PCB, lithium-ion battery, LED, LCD, OLED and other fields. The cost performance advantage of high-end equipment and the increase in localization rate will drive the company's performance growth. This fixed increase will further expand the company's production capacity to better meet the needs of downstream customers. Furthermore, extension development is also expected to be a booster for the company's development. It is estimated that the company's EPS from 2017 to 2019 will be 1.20 yuan, 2.49 yuan, and 3.61 yuan respectively. Based on the elasticity of the company's performance growth, the company will be given 20 to 25 times PE in 2018, with a reasonable valuation of 49.8 to 62.25 yuan for the next 12 months, maintaining the company's “highly recommended” rating. 4. Risk warning: 1. New product development is slow; 2. Fixed growth has not progressed as expected; 3. LED and OLED development falls short of expectations.