Investment key recommendation logic: In the face of weak traditional business growth, Qingdao Jinwang Precision Cosmetics, with a comprehensive layout of R&D, production, brands and channels, is the first stock in the entire A-share beauty industry chain; the target operating capacity of the company's acquisition is strong, which is expected to drive the company's performance explosion under the synergistic effect. The 2018 mid-year report predicts a 50%-80% year-on-year increase in net profit from non-backward growth; the company has begun to actively build a digital supply chain and new retail technology service platform for the face value industry to improve internal efficiency and export innovative technology and services to the outside world. The cosmetics market is growing at a remarkable rate, and there is huge room for growth. In 2017, the retail sales volume of cosmetics above the limit in China reached 251.4 billion yuan, with an annual growth rate of 13%, higher than the 8.2% annual growth rate of total retail sales of social consumer goods above the limit, and higher than the 4.2% growth rate of the global cosmetics market. Compared with developed countries, the current consumption of cosmetics per capita in China is low, less than 1/2 of the US and 1/5 of Japan and South Korea, so there is huge room for growth. Transform beautifully and build a face-value economy and industrial circle. (1) Channels: Make concerted efforts online and offline to build barriers to channel competition. In terms of online channels, the two acquisitions completed 100% of Hangzhou Youke. Hangzhou Youke is currently the second largest cosmetics online operator in China; in terms of offline channels, it was mainly completed through its subsidiary Shanghai Yuefeng, which is a professional offline direct cosmetics channel operator; in addition, Jinwang Industrial Chain Company was established to expand the company's offline channel territory. (2) Brand: Multi-brand strategy, full coverage. As a company in the entire beauty industry chain, the company owns many high-quality brands, and now has franchise and agency rights for more than 200 well-known domestic and foreign brands. (3) R&D: Lay out upstream R&D to open up the entire industry chain. Acquired 45% of Guangzhou Dongfang's shares to lay out upstream cosmetics R&D and brand planning. Currently, the company has a comprehensive layout of R&D, production, brands and channels, and is the first share in the entire A-share beauty industry chain. Jinwang's next goal: a digital supply chain and technology service platform for the face value industry. Based on the mass cosmetics supply chain in various provinces, Internet tools, big data and artificial intelligence technology are used to informatize, digitize and upgrade the supply chain and terminal retail, improve internal efficiency, reduce costs, improve operating processes, build a “digital new retail SaaS technology service platform”, export innovative technology and integrated service solutions to the outside world, and promote the transformation of resources and scientific and technological achievements in the cosmetics industry into value. Profit forecasts and investment advice. The company's net profit for 2018-2020 is estimated to be 4.1 million yuan, 560 million yuan and 690 million yuan respectively, corresponding to EPS of 1.0 yuan, 1.38 yuan and 1.7 yuan, respectively. Comparable companies have a maximum valuation of 81 times and a minimum valuation of 21 times. Considering that the company is located in a high-growth industry, the effects of the entire industry chain layout and terminal channel integration are obvious. It is given 30 times PE and a target price of 30 yuan, covering the “buy” rating for the first time. Risk warning: the risk of channel integration falling short of expectations; the risk of significant impairment of goodwill.