Investment highlights: Net profit for the full year of '17 was 41.688 million yuan, up 194.5% year on year. According to the company announcement, operating income in 2017 was 1,218 billion yuan, up 7.7% year on year, attributable net profit was 41.688 million yuan, up 194.5% year on year; basic earnings per share were 0.13 yuan/share. According to this estimate, the company achieved attributable net profit of 24.5084 million yuan in the fourth quarter, an increase of 197.87% over the previous year. The company achieved rapid growth in net profit, mainly due to rising industry prosperity, a sharp rise in volume and price of advantageous products, and effective control of company expenses. Leading carbamate pesticide, traditional products continue to gain strength. The company is a leader in carbamate pesticides in China. In 2017, the company's pesticide product revenue accounted for 85.8%, and gross margin reached 25.62%, an increase of 0.95 percentage points over the same period last year. In 2017, the average price of kabivir was 74,000 yuan/ton, up 7.2% year on year; the average price of dovir was 57,400 yuan/ton, up 14.7% year on year. The price increase was mainly due to stricter environmental protection and tight supply of the intermediate butyl phenol. According to Zhuochuang data, the latest price of KBR is currently 90,000 yuan/ton, an increase of 20,000 yuan/ton from the beginning of '17, an increase of 29%; the latest price of KBR is 68,000 yuan/ton, up 18,000 yuan/ton from the beginning of '17, an increase of 36%. Heterocyclic phase I was successfully put into production and is expected to contribute to growth in 2018. The company will raise an additional 206 million yuan for the construction of projects such as heterocyclic pesticides, intermediates, and environmentally friendly pesticide production facilities. Among them, heterocyclic pesticides and intermediates include 4000 tons of sulfidovir, 1000 tons of o-hydroxytoluenitrile (pyrimidine intermediate), 2000 tons of chloro-5-chloromethyl thiazole (CCMT, thiamethoxine intermediate), 800 tons of thiamethoxam production equipment, and 1,200 tons of thiamethylamine; environmentally friendly pesticide projects include some self-developed insecticides and formulations. At present, the first phase of the heterocyclic cycle of 4,000 tons of sulphur and doxide was put into operation in January '18. The company expects annual sales revenue of 377.6 million yuan after delivery, with an average annual profit of 62.13 million yuan. Cost control has been effective, and equity incentives have unleashed vitality. The company's gross margin level in 2016 was 23.77%, but the net profit margin was only 2.66%, mainly due to excessive period expenses, of which the management expense ratio reached 11.69%. In 2017, in accordance with the principles of streamlining and efficiency, the company promoted three system reforms, streamlined functional institutions, strengthened budget and bid management, and successfully reduced the management cost rate to 10.98%. We believe that the state-owned enterprise reform is expected to greatly improve the company's operating efficiency and performance. In addition, the company implemented an employee stock ownership plan to purchase fixed shares to further enhance the company's employee cohesion and enterprise development vitality. Profit forecast. We forecast net profit attributable to 2018-2020 to be 110 million yuan, 170 million yuan, and 240 million yuan respectively, corresponding to EPS of 0.31, 0.49, and 0.69 yuan/share, respectively. The company was given 26 times PE corresponding to 2018 (PEG is 0.35), with a target price of 8.06 yuan, and given an increase in holdings rating. Risk warning. Raw material prices are rising; fund-raising projects are progressing less than expected; and cost control is not in place.