Key investment points: Leading hydraulic equipment companies to master core technology. The company is a leading enterprise in the domestic fully automatic hydraulic molding equipment industry. Its traditional business is to manufacture large-scale hydraulic equipment, mainly used in construction, coal and other industries. Affected by the decline in downstream demand, the company's traditional business revenue continued to decline: in 2017, the company's revenue was 270 million yuan, and hydraulic equipment revenue was 87 million yuan (when it went public in 2010, the company's revenue was 350 million yuan, hydraulic equipment revenue was 277 million yuan); in terms of profit, the company's net profit in 2017 was 7.01 million yuan, with no loss of 18.14 million yuan after deduction. The company has been working in the press industry for 24 years. The market share of all types of press businesses ranks in the top three, and has 236 authorized patents. The transformation into the field of lightweight composites led to a shift in business models. The company has been actively exploring the path of transformation since 2012. In 2015-2017, the company's R&D expenditure ratio reached 26.4%, 34.9% and 19.5%, respectively. The main direction was the manufacturing process of new composite materials. Relying on the self-developed HE series composite press, the company has successfully put into production a production line for glass fiber products such as LFT-D and SMC and HP-RTM carbon fiber products. Among them, SMC composite products can reach Class A surfaces, and the production process is leading in the world. Currently, composite products are mainly used in automobile weight reduction and construction weight reduction, including car body coverings, power battery cases, structural parts and building templates. After entering the composites field, the company's business model changed: midstream equipment moved to downstream manufacturing, and revenue volatility was drastically reduced. Currently, the company's gross margin of composite products is 35%, higher than 22% of the press business. The overall gross margin is expected to continue to rise in the future as the revenue structure changes. Vehicle weight reduction is the general trend, and composites have broad application space. Every 10% reduction in vehicle weight can reduce fuel consumption by 6%-8%. Due to the 2020 “100 km 5L” fuel consumption target and the increase in the penetration rate of new energy vehicles, OEMs are expected to accelerate the pace of weight reduction. The weight reduction of fuel vehicles brings about a decrease in fuel consumption levels, and the marginal benefits of weight reduction are borne by consumers; however, the weight reduction of electric vehicles can increase the range under the same battery capacity conditions, so OEMs have an urgent incentive to promote weight reduction. Using composite materials to produce covers such as four doors and two covers can reduce stamping, welding, and coating procedures. Currently, the comprehensive cost of composite materials is already highly competitive, and future industry equivalents can be expected. It was endorsed by Geely and Ningde times, and orders were obtained and entered a good harvest period. The company received an order for CATL battery cases in December 2017 and is expected to generate 150 million yuan in revenue over the next 3 years. The company is also fully cooperating with Geely New Energy Commercial Vehicles and will start production in Yiwu to provide Geely with LFT-D, SMC and carbon fiber packages. The company has now received instructions to open the model for Geely British Taxi TX5 and is expected to achieve revenue of 450 million yuan during the life cycle. The company's automaker customers also include BMW, Yutong, and Dongfeng Liuqi; major manufacturer endorsements are expected to help the company develop new customers in its composite materials business. Risk factors: Sales of supporting models fell short of expectations; rising raw materials eroded the gross profit margin of composite products; seasonal fluctuations in the lightweight construction business; and cooperation with Geely New Energy Commercial Vehicle did not meet expectations. Profit forecasting, valuation and investment ratings. We forecast the company's 2018-2020 EPS to be 0.17/0.57/0.92 yuan respectively (0.03 yuan in 2017). The company is a scarce target for automobile weight reduction, and the manufacturing process and cost control capabilities of composite products remain ahead in the industry; as the company's products are recognized and endorsed by customers, the company is expected to continue to receive new orders, and performance is expected to improve significantly in the next 3 years. We gave the company a valuation of 35 times PE in 2019, with a target price of 20 yuan. Covered for the first time, a “gain” rating was given.