Stricter environmental protection is driving the continuous removal of production capacity. As the sole target of the entire A-share meat duck industry chain, the company has benefited from increased market share and rising duck prices. The company is the only target for A-shares in commercial duck breeding, slaughter, deep processing, and food. According to statistics from the China White-winged Duck Association, starting in the second half of 2017, due to environmental impact, the production capacity of white-winged ducks is expected to drop from 2.5 to 2.5 billion ducks in 2018. According to the company's 2017 annual report, breeding projects such as the company headquarters, Xincai, and Weishi continue to advance. The slaughter volume went from 61 million in '16 and 87 million in '17 to 122 million in '18 (planned volume), and the market share is expected to increase rapidly. Prices of duck seedlings and duck meat products have increased dramatically. The meat duck industry has entered a boom stage. According to statistics from Wind and Waterfowl Network, in May 2018, the price of duck fry in the main production areas reached 4.5 yuan/feather, an increase of 390% (the average price from January to May was 2.8 yuan/feather, breaking through the company's complete cost line). The price of duck split products reached 8000 yuan/ton, an increase of 20%, and the price of duck by-products reached 15,500 yuan/ton, an increase of 30%. The rise in duck prices is still sustainable over the medium to long term. According to statistics from the White Feathered Meat Duck Association, the price of parent surrogate duck fry has now risen to about twice the cost. It will take about 20 months from the expansion of ancestral surrogate production until meat ducks are released. Under a pattern where production capacity is removed and supply is limited, the rise in duck prices in the medium to long term is still sustainable. Overall, the company benefited from the rise in duck prices in '18, and the profitability of duck seedlings and duck products is expected to increase significantly compared to '17. It is estimated that the company's performance in 2018 is 200 million yuan, which is currently one of the few livestock and poultry farming stocks that have not risen. Breeding: It is estimated that the company will produce about 200 million ducks in 2018, of which 100 million will be exported and 90 million will be slaughtered. The full cost of breeding duck seedlings is estimated to be around 2.7 yuan/bird. Frozen products: It is estimated to be around 270,000 tons in 2018, including 210,000 tons of frozen duck. The full cost of frozen duck is estimated to be around 9750 yuan/ton. Currently, a single ton has a profit of 750 yuan and frozen chicken is 60,000 tons, making a relatively small contribution to profit. Down: Revenue of 2 billion yuan in 2018 (Xintang down) and profit of 110 million yuan is estimated at 51%. The net profit of down last year is 88.5 million yuan, and the annual net profit for down is expected to increase by 20% in the future. Overall, it is estimated that the company's performance in 2018 is 200 million yuan. In May 2018, the target of livestock and poultry farming increased significantly in line with expectations of a rebound in pig and chicken prices. Companies are among the few that have yet to rebound. The possible reason for the recent decline in stock prices is the chain reaction caused by the collapse of trust products in institutional holdings. This is not related to the fundamentals. The reform of state-owned enterprises continues to advance, and the management continues to increase its holdings, demonstrating the company's confidence. According to the company announcement, starting in 2017, the company has implemented an internal security deposit system, and an external performance betting business model. The subsidiary's management team participated in performance binding, and 30% of the excess performance was distributed to management. A flexible incentive mechanism was adopted under the state-owned system to promote the improvement and improvement of the company's management capacity. On March 27, 2018, the company issued an announcement that management plans to increase its holdings by no less than 100 million yuan from March 27 to September 26, further demonstrating the company's management's confidence in future development. Investment suggestions: Due to stricter environmental protection, farming costs have increased. We have lowered our predicted net profit for 18-19 from 26/347 million yuan to 2.02/264 million yuan, EPS from 0.49/0.65 yuan to 0.38/0.49 yuan, corresponding PE to 16/13 respectively, and the target price from 20 yuan to 13 yuan, continuing to give a “buy” investment rating. Risk warning: the rise in duck prices falls short of expectations, performance falls short of expectations for gambling, and forced liquidation of trust plans