Investment Key Company released its 2018 quarterly report on April 26. During the reporting period, the company achieved revenue of 6.874 billion yuan, an increase of 20.31% over the same period last year, and net profit of 530 million yuan, an increase of 27.64% over the same period last year. Basic earnings per share were 0.17 yuan, up 30.77% from the same period last year. Our comments on this are as follows: the industry is slowly recovering, and product volume and prices have risen sharply in the first quarter. In 2017, due to sluggish demand in the compound fertilizer industry combined with a rapid rise in the price of single fertilizer, the overall prosperity of the compound fertilizer industry was low. Affected by this, the gross profit of the company's ordinary compound fertilizer and controlled release compound fertilizer declined by 4.16% and 4.80% respectively, and the company's overall performance declined. In 2018, with the slow recovery of the bottom of the compound fertilizer industry, the company's performance in the first quarter slightly exceeded expectations. The sharp rise in the volume and price of compound fertilizer products led to a sharp increase in net profit. The gross sales margin and net profit margin were 17.81%/8.93% respectively, a significant recovery from the end of the previous year. We believe that as the peak spring farming season approaches, low inventories from dealers are triggering demand for storage, while rising prices such as crude oil are driving a steady recovery in grain prices, which is conducive to price increases and replacement demand for compound fertilizer, and the company's performance is predictable. The “Jinfeng Commune” model is beginning to bear fruit, opening up profit margins. The “Jinfeng Commune” agricultural service platform initiated and controlled by the company achieved rapid promotion in 2017. Relying on the “land trusteeship” model, the company is committed to providing a package of refined, specialized, labor, technological, and innovative agricultural services to Chinese planting farms, farmers' cooperatives, growers, etc., to improve agricultural efficiency, improve the quality and yield of agricultural products, and increase farmers' profits. At present, the company has set up more than 80 county-level communes; we believe that as the model matures and promotion efforts increase, the goal of reaching 150/300 service outlets in 18/19 can be successfully achieved, opening up profit space. Extend the industrial chain and speed up the internationalization process. The company actively expands the global market, acquires German Kangpu Horticulture, Dutch Hawken, etc., and continues to enhance its competitiveness and international popularity. The company currently indirectly holds 88.89% of the shares in Kim Jeong Tae in Germany. It has a high market influence in the European home gardening and specialty fertilizer industry, which is conducive to the further expansion of the company's industrial chain and the promotion of overseas business layout. We believe that as the company's degree of internationalization increases further, overseas markets will be expanded and sales volume will continue to grow. Risk factors: 1) The impact of fluctuations in raw material prices on the company's operations and management; 2) the inability to absorb the impact of new production capacity on the company's profitability in a timely manner; 3) the impact of the continued downturn in the agricultural products market on demand. Profit forecasts and valuations. The company's performance declined in 2017 due to the downturn in the industry and the cost side, but with the recovery in market demand and the improvement of the industry pattern, we believe that compound fertilizer products have entered the stage of profit restoration, and our long-term optimism about the company has not changed. Since the recovery of the compound fertilizer industry falls short of expectations, and prices of upstream products are still rising, the company's 2018/2019/2020 EPS forecast was lowered to 0.35/0.48/0.63 yuan (the original EPS forecast for 18/19 was 0.45/0.57 yuan), the target price of 11.5 yuan (corresponding to 31 times PE in 18 years) was maintained, and the “buy” rating was maintained.