Incident: According to the company's announcement, Haiyuan New Materials, a wholly-owned subsidiary, plans to invest in the construction of the “Haiyuan New Materials Yiwu Production Base Project” within the Yiwu Economic Development Zone and close to Geely New Energy Company. The project plans to use 240 acres of land, and the first phase uses about 104 acres of land. The proposed site is a voluntary green power town. The total investment of the project is estimated to be about 1.2 billion yuan. Comment: Build a production base in Yiwu to expand production capacity close to customers to meet future orders. The first phase of the project plans to invest in two SMC lightweight products and LFT-D lightweight products production lines for automobiles with a standard production capacity of 400 tons/year, and two carbon fiber production lines, which are expected to be completed and put into operation within 24 months after obtaining a construction permit; the second phase plans to invest in four SMC lightweight products and four carbon fiber production lines, which are expected to be built in 2019, greatly increasing the company's production capacity. The company cooperates closely with Geely New Energy. In December 2017, the two sides signed a comprehensive strategic cooperation agreement in the field of automotive lightweighting. In April 2017, the company received an order for Geely exterior body covering parts. It is estimated that more than 50,000 vehicles will be supplied with SMC exterior covers, involving 20 types of parts. In December 2017, the company obtained Geely New Energy's MPC-1 project opening instructions, and has now gradually moved into the mold testing and mass production stage. Geely is vigorously exploring lightweight in various parts such as the body, powertrain, and chassis. The company and Geely had in-depth technical communication in the early stages. The current production base is close to Geely's construction, which will further bring the relationship with customers closer, and orders are expected to enter a period of rapid growth. Seize the demand for lightweight new energy vehicles and firmly grasp the opportunities for lightweight automobiles. In addition to Geely, the company also cooperates with leading companies such as CATL. CATL is the world's leading lithium battery manufacturer. According to Gaogong Lithium Battery, it recently entered the Volkswagen global supply chain system and plans to select a location to build a plant in Europe to supply European car companies, including BMW, and sell its products globally. The company is expected to benefit from the development of downstream customers and has broad prospects for future development. Policies promote the application of composite materials in the automotive industry, and long-term steady growth in performance can be expected. According to a report by the Financial Association, the Ministry of Industry and Information Technology said that in 2018 it will speed up the implementation of new chemical materials to repair shortcomings, guide the work of the Carbon Fiber and Composites Industry Development Alliance, promote the establishment of an automotive lightweight non-metallic materials industry alliance, and promote the application of engineering plastics and carbon fiber composites in the automotive industry. Furthermore, the technology roadmap for energy-saving and new energy vehicles indicates that vehicles in 2020, 2025, and 2030 will be reduced by 10%, 20%, and 35%, respectively, compared to 2015; by 2030, carbon fiber usage will account for 5% of vehicle weight, while achieving widespread application of carbon fiber composite hybrid bodies and carbon fiber components. According to our industry chain research, the domestic carbon fiber conforming materials market will reach 10 billion by 2025. As a leading enterprise in lightweight composite materials, the company has sufficient technology and product reserves, and is expected to benefit deeply. Investment suggestions: The company has been deploying the lightweight automobile and construction markets for many years and has begun to gradually enter the harvest period. Orders are expected to grow rapidly, and rapid growth can be expected. The company's revenue from 2017 to 2019 is estimated to be 275 million yuan, 647 million yuan, 1,558 million yuan, and net profit of 0.7 million yuan, 70 million yuan, and 249 million yuan respectively, maintaining a buy-A investment rating. The six-month target price is 20.79 yuan, which is equivalent to a dynamic price-earnings ratio of 77 times in 2018. Risk warning: Composite materials market development falls short of expectations, and industry growth falls short of expectations.