This report is read as follows:

The company will continue to expand the civil plate business and give full play to the advantages of forest resources, technology and equipment. The wood structure business will advance steadily and contribute new growth points in the medium and long term.

Main points of investment:

Lower the target price to 8.1 yuan to maintain the overweight rating. The company's 2017 revenue and performance growth is basically in line with market expectations, product structure adjustment and acquisition target consolidation led to a substantial increase in box board income, civil plate business will gradually become a new growth point. As the progress of the timber structure business is lower than the forecast at the beginning of 2017, the profit forecast for 2018-2020 is lowered to 0.54 yuan (- 0.13) / 0.65 (- 0.2) / 0.79 yuan, the comparable company gives 15 times PE in 2018, and the target price is lowered to 8.1 yuan to maintain the overweight rating.

Performance growth is basically in line with expectations. In 2017, the company achieved revenue of 1.818 billion yuan, an increase of 39.05%, a net profit of 466 million yuan, an increase of 21.47%, and a non-attributive net profit of 454 million yuan, an increase of 19.44%. The growth in revenue and performance mainly came from the increase in production capacity, the increase in product orders and the contribution of the new subsidiary New Huachang Wood.

Product structure adjustment and Xinchang wood industry combined table led to a substantial increase in box board income compared with the same period last year. The revenue of the container floor was 1.326 billion yuan, an increase of 111.16%, and the gross profit margin of 33.38% was the same as an increase of 4.34pct. The substantial increase in container board revenue mainly came from the adjustment of product production and sales structure, and the consolidation of New Huachang Wood Industry.

Due to the adjustment of production capacity allocation, the environmental protection board achieved a revenue of 327 million yuan, a decrease of 33.78%, a gross profit margin of 46.91%, and a reduction of 2.06pct. It is expected that the concentration of the container board market will gradually concentrate to the leader in the future.

The wooden structure business is advancing steadily and contributing to new growth points in the medium and long term. The company established the strategic policy of developing assembly cabin project in the second half of 2016, and the operation of subsidiary Tianxin is gradually on the right track. By the end of 2017, the company has completed a wooden cabin with a total construction area of nearly 5000 square meters, Tianxin Industrial Park will be completed in 2018, and the intelligent fabricated wooden structure housing factory will be put into production in 2018, which will gradually become a new growth point of the company in the medium and long term.

Risk hint: due to the fluctuation of raw material prices, the progress of wood structure is not as expected.