Key investment points: 900 million dollars to acquire pesticide assets of major shareholders. On January 20, 2018, the company announced that it plans to purchase 51% of Hang Lung Crops's shares held by the controlling shareholder Yabang Group at 904 million yuan in cash, while also transferring 19.6% of the shares held by 26 other shareholders to obtain a total of 70.60% of Hang Lung Crops's shares. Hang Lung Crops promised to achieve net profit of no less than 90 million yuan, 123 million yuan, and 141 million yuan respectively from 2018 to 2020. After this acquisition is completed, the company will expand businesses such as pesticides and crop protection APIs on the basis of consolidating the traditional dye business, and create new business growth points. The target company has a complete industrial chain and stable customer quality. Hang Lung Crops, the target of this acquisition, was founded in 2013. The products mainly focus on pesticides, R&D and production, and have advantages in the entire industry chain from basic chemical raw materials to intermediates to original drugs. The main content of the company's main products, oxaxidone, has established a long-term cooperative relationship with Bayer in Germany, and is registered in more than ten countries and regions around the world. The business volume of a single product is around 200 million; the content of methoxazone products can reach over 97%; the main content of tricyclazole is over 96%. This product is currently in cooperation and negotiations with Dow Yinong and is gradually included in Dow's procurement list; triazinone is the main pesticide intermediate for Hang Lung crops. The annual output is ranked first in the world and has been certified by American producers. Germany's Bayer has included Hang Lung's product in its procurement plans. In addition, the company's subsidiary Jindong Agrochemical is an oxaxidone API manufacturer. Currently, photo-gas processing products can reach more than 2,000 tons/year. Leading in the dye segment, the main business is growing steadily. The company is the largest manufacturer of anthraquinone structural dispersion and reduction dyes in China. The market share of the main products in China is around 35%. The company currently has a production capacity of 14,000 tons of anthraquinone disperse dye filter cakes, 20,000 tons of anthraquinone disperse dye products; 8000 tons of reduced dye filter cake production capacity, 6,000 tons of reduced dye products; and a production capacity of 50,000 tons of dye intermediates. According to statistics from Zhuochuang Information, as of January 26, 2018, the price of conventional disperse dyes was 29,000 yuan/ton (reflecting actual transaction price), compared to 21,000 yuan/ton in the same period last year, an increase of 38% over the same period last year. Merged and acquired Daobo shares to continue to lay out the fine chemicals sector. In September 2015, the company acquired Jiangsu Daobo Chemical Co., Ltd. for 450 million yuan and successfully entered the solvent dye market, further expanding the company's product range. The company uses existing resources, capital, and brand advantages to continue to lay out the fine chemical sector. In addition to the current pesticide assets, other fields such as benzoyl chloride and organic pigments are also extension fields that the company is concerned about. Profit forecasts and investment ratings. Due to stricter environmental policies and the continuous withdrawal of small production capacity in highly polluting industries such as dyes and pesticides, the prices of company dyes and intermediates are expected to continue to rise. We expect the company's net profit for 2017-2019 to be 634 million yuan, 737 million yuan, and 851 million yuan (not considering asset acquisition), respectively. The corresponding EPS is 1.10/1.28/1.48 yuan/share, respectively. Referring to the valuation level of companies in the same industry, 13 times PE in 2018, with a target price of 16.64 yuan, and a “increase in holdings” rating. Risk warning: Product prices falling; risk of failed acquisitions.