Key investment points: Company announcement: The company plans to obtain 51% of the shares of Jiangsu Henglong Crop Protection Co., Ltd. held by Yabang Group through equity transfer, and transfer 40% of Hang Lung Crops shares held by other shareholders (equivalent to 19.60% of the total share capital), for a total of 70.60% of the shares. The total investment amount of the project was 903.68 million yuan, and the capital was raised by the company itself. The Group's high-quality pesticide assets have benefited from the recovery of the industry and a significant increase in profitability. Hang Lung Crops was founded in 2013. Both its controlling shareholder and the controlling shareholder of the listed company are Yabang Group. The company's products mainly focus on pesticides, R&D and production. At present, it has formed three series of products: insecticides, biocides, and herbicides. Its wholly-owned subsidiary, Jindoo Agrochemical, is an oxacidone API manufacturer. Currently, phosgene processing products can reach more than 2,000 tons/year, making it a key pesticide manufacturing enterprise of the Ministry of Agriculture and a phosgene production unit of the Ministry of Industry and Information Technology. The company's main product, oxacidone, has established a long-term cooperative relationship with Bayer in Germany. It is registered in more than a dozen countries and regions around the world, with a business volume of around 200 million; tricyclazole is currently being negotiated with Dow Yi-Nong and is gradually being included in Dow's procurement list; triazinone is the main pesticide intermediate for Hang Lung crops, which ranks first in the world in annual output and has obtained certification from American manufacturers. Bayer of Germany has included Hang Lung Crops in its procurement plan. In 2016, Hang Lung Crops had a net profit of 15.44 million. In 2017, it benefited from the rise in pesticide industry sentiment and completed the acquisition of agrochemicals under the same control. Profitability increased dramatically, with a net profit of about 86 million yuan. The pesticide industry is expected to prosper, and this acquisition will inject new momentum into the company's long-term development. Listed companies were originally the absolute leaders in anthraquinone dyes. Due to the small scale and limited growth of the high-end dye industry, their performance has been basically stable in recent years. However, the pesticide industry is still developing strongly. With the further implementation of policies to support agriculture and the expansion of crop cultivation areas, the demand for pesticides in rural China will further increase. In the global market, according to PhillipsMcDougall statistics, the global pesticide industry since 2000 can be summarized as following a boom cycle of roughly 5 years. It is expected that 2020 will reach the peak of this cycle, and the global pesticide market will reach more than 60 billion US dollars. At the same time, as domestic environmental protection requirements become more stringent, industry profits will be concentrated on enterprises with technological and environmental advantages. Hang Lung Crops focuses on chemical pesticide synthesis and manufacturing. Starting with basic chemical raw materials, the product chain is long and the synthesis process is complex. It has strong product chain advantages, and product quality meets the formulation processing needs of high-end customers. At the same time, the company has advanced product synthesis technology and uses green synthesis technology for catalytic hydrogenation. The main product content is high and there are few “three wastes”, which is in line with the major trend of the green and environmentally friendly industry. The company promises that net profit after tax in 2018-2020 will not be less than 0.9, 1.23, and 141 million yuan, respectively. The completion of this acquisition will inject new momentum into the company's long-term development. Continued epitaxial layout around the main line of fine chemicals is expected to blossom more in the future. In 2015, it entered the field of anthraquinone solvent dyes through the acquisition of Daobo Chemical. With the development of pre-spinning coloring and inkjet printing and dyeing technology, the solvent dye industry grew by around 30%. In 2017, the company announced the use of its own capital 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 build 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. The pigment market is expected to open up new space. The company continues to lay out around the main line of fine chemicals, and is expected to break through the single profit point of the original main business and achieve more growth. Profit forecast and rating: Considering the increase in the company's performance due to this acquisition, the 17-year performance forecast was maintained at 659 million yuan, and the profit forecast for 18-19 was raised to 8.83 million yuan, 950 million yuan (original value: 848 million yuan, 893 million yuan), EPS 1.14, 1.53, and 1.65 yuan, corresponding to PE 14X, 11X, and 10X. Maintain an “Overweight” rating. Risk warning: The price of the product fell, and the target of the acquisition did not meet expectations