Incidentally, on December 15, the company announced that it plans to implement a 40,000 tons/year lithium battery electrolyte project in Poland. Ruitai New Energy and Huarong Chemical will each invest 150 million yuan to establish a new company in Poland. Among them, Ruitai New Energy raised some capital at the beginning of the year. Will Huarong Chemical use its own capital to fund it? The construction period is expected to be about 30 months. The new project in Poland ensures that the company can meet customer needs nearby and in a timely manner, while also developing markets in other European countries. Thus promoting the healthy development of the chemical business. The company announced a series of equity transfer announcements between the company, its subsidiaries and subsidiaries. The main contents include five transactions, including the acquisition of 25% of Huatai Industrial's shares, the transfer of 81.84% of Huarong Chemical's shares, and the transfer of shares in Sihong International Trade and other companies. The company accelerates the pace of internal equity transfers and effectively promotes the strategic construction of holding companies. The short review plans to use the funds raised for the Polish electrolyte project to connect with Korean customers and seize the European market. The company originally planned to use 1.01 billion yuan of the additional capital raised at the beginning of the year for the Vietnam Industrial Zone project, but due to the withdrawal of the US from the TPP, Vietnam no longer has an advantage as a member of the TPP, so it was decided to change the fund-raising project. Previously, 150 million yuan was invested in implementing the Myanmar garment industry base project. Currently, 860 million yuan of this capital raised has not been used. The company announced that it will use some of the remaining capital raised to invest 40,000 tons/year in a lithium-ion battery electrolyte project in Poland. Ruitai New Energy and Huarong Chemical will each invest 150 million yuan to establish new companies in Poland. Among them, Ruitai New Energy will invest 150 million yuan from raised capital, and Huarong Chemical will invest 150 million yuan from its own capital. The estimated construction period is about 30 months. After the project is implemented, the estimated annual revenue is 2.2 billion yuan, annual profit after tax is 318 million yuan, and the payback period after tax is 509 years. Europe has paid more attention to automobile pollution in recent years, and has continuously deepened the popularization and promotion of electric passenger vehicles, thus attracting excellent global investment in new energy capital. According to Reuters, LG Chemical, a subsidiary of the LG Group, announced in October this year that it will build Europe's largest lithium-ion battery factory for electric vehicles near Wroclaw, Poland, with an investment of 1.63 billion US dollars. Mass production is expected to begin in 2019. It can supply 100,000 electric vehicles with lithium-ion power batteries every year. It is LG's largest plant other than the South Korean factory. The company used the construction of a lithium-ion battery electrolyte project in Poland as an opportunity to cooperate with relevant customers in business and reduce transportation costs. At the same time, seize opportunities for European NEV development, connect with the Polish and EU markets as soon as possible, enhance the company's differentiated competitiveness in the lithium-ion battery electrolyte business, and promote healthy growth in the chemical business. Internal equity transfers cover foreign trade and chemicals, and the transformation of the holding platform is intense 1. The company plans to pay 613.2225 million yuan in cash to acquire 25% of Huatai Industrial's shares held by Cathay Pacific Group (the company's controlling shareholder). Huatai Industrial is mainly engaged in wholesale and retail trade. It is an important shareholder of the Cathay Pacific Group and forms potential competition with the company. Therefore, Cathay Pacific Group previously promised to sell its shares in Huatai Industrial by the end of 2017. The deal fulfilled the sale promise, eliminated potential competition from the industry, and improved internal controls. 2. The company transferred 81.84% of Huarong Chemical's shares to Jiangsu Ruitai New Energy, a wholly-owned subsidiary. The company adjusted its chemical organizational structure, assigned specific businesses to subsidiaries, concentrated its strengths to strengthen R&D and innovation, and promote the rapid and healthy development of the company's new chemical materials and new energy business. 3. Transfer of shares in other foreign trade subsidiaries: The company transferred 100% of Sihong Guomao's shares to the holding subsidiary Guomao Industrial, and transferred 100% of Guomao Apparel's shares, 90% of Rugao Apparel's shares, 100% of Shuyang Ruitai's shares, and 50.98% of Shuyang Xiangtai's shares to the holding subsidiary Guosheng Industrial. Guomao Apparel, the holding subsidiary of the company, transferred 100% of Yayun Apparel's shares and 25.5% of Huai'an Guomao's shares to the holding subsidiary Guomao Industrial. Since the company announced on September 29 that all 8 holding trading business subsidiaries were transferred to the four subsidiaries, the company once again carried out internal equity transfers and expanded to the chemical business. Since the company completed capital injection in the foreign trade business at the beginning of this year, it has accelerated the pace of equity transfers within the group, continuously rationalized the organizational structure, clarified the parallel progress of the foreign trade and chemical industries, focused on implementing the strategic construction of “holding companies” of listed companies, decentralized the business to subsidiaries, and coordinated internal resources. At the same time, the binding of employee interests was completed at the same time as equity transfers, the incentive mechanism was improved, and development vitality was promoted. Investment advice: We continue to be optimistic about the development prospects of Jiangsu Cathay Pacific as a leader in supply chain management+electrolyte, and emphasize that the recent decline in stock prices is mainly due to large differences in market expectations, especially the chemical business. The company's chemical department is the core supplier of LG, Sony, and CATL. Customer diversification is guaranteed, and they are optimistic that future downstream customer capacity growth will be driven by long-term trends. At the same time, the company's Zhangjiagang 20,000 ton electrolyte project has contributed to production, and there is plenty of momentum to drive future order growth. We maintain the net profit forecast of 8.02 billion yuan and 1,056 million yuan respectively for 2017-2018, corresponding to a total share capital of 1,208 million shares after stock exchange and foreign capital raising, EPS was 0.51 and 0.67 yuan/share, respectively, corresponding PE was 17 and 13 times, respectively. The company has characteristics such as high ROE, undervaluation, and steady growth. As equity binding gradually deepens, the upper and lower interests are consistent. We expect future performance growth to continue to increase. We are firmly optimistic and maintain the “buy” rating. Risk factors: The decline in macroeconomic growth may cause downstream customer demand in the foreign trade supply chain business to shrink; exchange rate risks affect profitability; collaboration and integration of the Group as a whole after listing are blocked, causing the growth rate of foreign trade business to fall short of expectations; and the risk of falling electrolyte prices.