Key investment points: leading carbamate pesticides and actively expand new products. The company is a leading manufacturer of carbamate pesticides in China. Its subsidiaries, Hailey Guixi and Hailey Changde, are national designated pesticide manufacturers. They have separate production facilities for phosgene and methylisocyanate with an annual output of 10,000 tons, providing raw material guarantees for the development of downstream phosgene products. The company's original products occupy a dominant position in the domestic market, and are currently speeding up the expansion of other pesticide product fields such as nicotinic pesticides. In the first three quarters of 2017, the company achieved revenue of 879 million yuan, an increase of 13.33% over the previous year; attributable net profit of 17.18 million yuan, an increase of 189.84% over the previous year. It has high-quality assets from Hunan Chemical Research Institute, leading the market in technical strength. In 2014, the company acquired 100% of the shares of Hunan Chemical Research Institute, achieved the integration of industry and research, and further improved its scientific and technological innovation capabilities. Hunan Chemical Research Institute has over 60 years of technical accumulation in chemical research and development. It is in a leading position in the domestic research and production of pesticide raw materials, pesticide intermediates, pesticide formulations, and phosgene series products, and has reached international advanced levels in some fields. In recent years, the company has continuously increased investment in research and development and registration of new products such as highly toxic pesticide replacement products, laying a solid foundation for the company's product restructuring. With the addition of new fund-raising projects, the performance is expected to rise to the next level. The company raised a fixed increase of 462 million yuan in capital in 2016 for heterocyclic pesticides and intermediates industrialization base construction projects, environmentally friendly pesticide production equipment construction projects, company R&D center construction projects, and supplementary working capital. Among them, the heterocyclic pesticide and intermediates projects include 4000 tons of sulfide, 1000 tons of o-hydroxytoluenitrile (pyrimidine intermediate), 2000 tons of chloro-5-chloromethyl thiazole (CCMT, thiamethoxine intermediate), 800 tons of thiamethoxam production equipment, and 1200 tons of thiamethoxamine; environmentally friendly pesticide projects include some self-developed insecticides and formulations. At present, construction of the first phase of the heterocyclic cycle of 4,000 tons of sulphur and dioxides began in 2014. It is expected that production will be put into operation by the end of the year, and other phase II products are progressing steadily. We believe that through this expansion of production capacity, the company's leading position in carbamate pesticides will be consolidated and the company's competitiveness in nicotinic insecticides and pesticides will be strengthened. State-owned enterprise reform enhances efficiency, and equity incentives unleash vitality. The company's gross margin level in 2016 was 23.77%, but the net profit margin was only 2.66%, mainly due to excessive period expenses, of which the management expense ratio reached 11.69%. In 2016, the company had a total of 2,346 employees, with a per capita output value of about 480,000 yuan, which is only a quarter of the average output value of agricultural chemical workers in Yangyang of 1.85 million yuan. We believe that the state-owned enterprise reform is expected to greatly improve the company's operating efficiency. At the same time, in the context of expanding production capacity and increasing output value, new jobs will be introduced through the training of old employees, improving operational efficiency and greatly improving performance. In addition, the company implemented an employee stock ownership plan to purchase fixed shares. The number of shares subscribed by company directors (excluding independent directors), supervisors, senior management, and core business key employees did not exceed 6.6401 million shares, further enhancing the company's employee cohesion and enterprise development vitality. Profit forecasts and investment ratings. We expect the company's EPS for 2017-2019 to be 0.08, 0.13, and 0.22 yuan. Currently, the company's performance is still at the bottom due to its high cost ratio, so the company's current valuation is high; it is expected that operating efficiency will improve after the release of additional production capacity in the future, so no ratings will be given yet. Risk warning. Prices of agricultural products have fallen, the pesticide market has declined, and production of new products has fallen short of expectations.