Investment logic The number of cars owned is growing steadily, and there is plenty of room for development in the automotive aftermarket. The scale of China's automobile market continues to expand, and the growth rate of overall automobile ownership is higher than the growth rate of the industry. Currently, the number of cars owned has exceeded 200 million, providing huge development space for companies in the automotive aftermarket sector. We expect that the market size of automotive fine chemicals such as automotive adhesives, antifreeze, brake fluid, and engine oil will reach 245.6 billion yuan in 2020, with a compound growth rate of 7.32% from 2017 to 2020, which is higher than the growth rate of passenger cars by about 3%. As a leader in the production of fine chemicals for automobiles, the company's market share continues to rise. Automotive fine chemicals is the company's core business. It has a total of 11 product categories, covering non-consumable materials for automobile manufacturing and consumables needed for daily use. Through cooperation with international chemical giants BASF and Dow Chemical, the company has introduced and developed technology. The product technology has reached world-class standards and positioned itself in the middle and high-end. In 2012, the IPO fundraising project was basically completed and put into operation, and production capacity was greatly expanded. Among them, the core products of antifreeze, brake fluid and adhesive increased by 59%, 57%, and 80% respectively, supporting the rapid development of the company's business. The company mainly supplies German and American products. In recent years, it has started supplying Japanese, independent brands, and new energy vehicles. It is currently stepping up cooperation with BASF to develop more new energy vehicle products, and it is expected that the company's market share will continue to increase in the future. The automotive aftermarket has broad prospects, and the company is expected to benefit fully. As the number of cars owned in China continues to expand, the demand for after-sales maintenance is growing rapidly. The maintenance price of traditional 4S stores is relatively high. The current situation is that many users choose cost-effective quick repair shops after getting insurance. The chain quick repair model is favored for its characteristics such as high cost performance and convenience. In 2015, the company launched 2S stores in the automotive aftermarket and promoted the “German Car Care” brand. Currently, it has more than 10,000 outlets in China. The company's early work has basically been completed, and standardized processes will be established and promoted later. It is hoped that the automotive aftermarket will fully enjoy the vast space and rapid development of the automotive aftermarket. Profit forecast and investment recommendations We believe that the company, as a leader in automotive fine chemicals, has basically completed the early layout of the 2S store, fully benefiting from market development, and is expected to release performance in the future, usher in an inflection point in profit growth, and achieve a relatively rapid increase in the company's net profit. We expect the company's net profit from 2017 to 2020 to be 149 million yuan, 182 million yuan, and 221 million yuan respectively, up 6.25%, 21.93%, and 21.45% year-on-year. For the first time, coverage gave an increase in holdings rating. The target price is 7.00 yuan, corresponding to 2017/2018/2019 PE of 35/29/24 times. Risk Warning (1) Post-market business development falls short of anticipated risk. (2) The risk of a decline in the company's gross margin. (3) New energy vehicle customer development falls short of anticipated risks.