It is a global leader in aluminum grain refining agents, and continues to expand the scale of production Aluminum grain refining agents are important materials for aluminum processing and can improve the performance of aluminum. As a global leader in this product, the company has maintained a global lead in technology research and development for many years. Currently, it occupies about 40% of the domestic market share and about 20% of the global market. The company currently has a production capacity of 34,000 tons of aluminum grain refining agents. It is expected to add 30,000 tons of production capacity through a fund-raising project, and plans to build another 30,000 tons of production capacity to further expand its leading edge in the industry in the future. Products are priced using the method of “aluminum price+processing fee on the order day”, and the company's profitability is less affected by upstream aluminum prices. The patented product potassium tetrafluoroaluminate is expected to become a new type of aluminum electrolytic flux. Companies use self-developed electromagnetic induction furnaces to produce potassium tetrafluoroaluminate to replace or partially replace the traditional flux aluminum fluoride. Using potassium tetrafluoroaluminate as an aluminum electrolytic additive can reduce the working temperature of the aluminum electrolysis production process, increase current efficiency by at least 2%, and increase current efficiency so that the production of each ton of aluminum saves at least 500 degrees of electricity compared to traditional simple use of aluminum fluoride flux. Domestic electrolytic aluminum production reached 32.27 million tons in 2017. Based on the 6.5 kg flux required for each ton of aluminum electrolysis, the future market demand space is about 210,000 tons. Improve the industrial chain, actively expand upstream and downstream The company uses aluminum grain refining agents as its core product, and actively expand upstream and downstream. The company acquired an upstream fluorite mine and established a fluoride salt production base in Jeonnam, Jiangxi. It has a production capacity of 60,000 tons of potassium fluorotitanate and 20,000 tons of potassium fluoroborate, making it completely self-supplied with the fluorine salt required for production. At the same time, 30,000 tons of aluminum-based intermediate alloys and 30,000 tons of high-titanium-iron alloy cored wire were built downstream to fill the gap in the domestic market space. The by-product potassium fluoroaluminate can not only produce a novel aluminum electrolysis flux, but can also be converted into hydrofluoric acid for foreign sales, improving the economy of the industrial chain. The company makes full use of its technological advantages, gradually improving the industrial chain, improving profitability and the ability to resist the risk of fluctuations in raw material prices. Investment recommendations We forecast the company's revenue for 17-19 to be 11.31/18.30/2,554 billion yuan, 42.4%/61.9%/39.6%, net profit of 1.13/2.54 billion yuan, corresponding EPS of 1.41/3.17/5.03 yuan, and PE corresponding to the current stock price is 54.6/24.3/15.4 times, respectively. The company is a leading global aluminum grain refiner company, and production capacity continues to expand drastically. The compound growth rate for the next 2 years is expected to be 88.6%. Referring to the valuation of comparable companies and considering a reasonable PEG level, we think it is more reasonable to give the company 35 times PE in 2018, corresponding to a reasonable valuation of 110 yuan/share. Currently, there is still a lot of room for growth, and for the first time, coverage is given a “buy” rating. The risk indicates that the progress of absorption of new production capacity is lower than expected; progress in the construction and commissioning of new projects is lower than expected.