Incidents: COFCO Biochemical released its 2018 semi-annual report. Operating income for the first half of 2018 was 3.455 billion yuan, an increase of 18.18% over the same period last year; net profit attributable to shareholders of listed companies was 183 million yuan, a decrease of 18.26% over the same period last year; and earnings per share were 0.19 yuan. Comments: High oil prices supported sales prices, and fuel ethanol performance increased. In the first half of 2018, the company's fuel ethanol business revenue and gross margin increased by 25.10% and 5.95%, respectively, over the same period last year. The improvement in performance was mainly affected by the rise in international crude oil prices and the fuel and ethanol industry development policies of the country's 15 ministries. In terms of revenue, international crude oil prices have continued to rise, and the price of No. 93 gasoline has risen sharply at the same time. The company's fuel ethanol sales price has risen accordingly and is expected to remain high. In terms of policy, on August 22, the executive meeting of the State Council decided that in 2018, the biofuel ethanol will be further promoted in 15 provinces including Beijing, Tianjin, and Hebei. In 2020, China will achieve full coverage of ethanol gasoline, and the corresponding demand will exceed 12 million tons. In order to eliminate competition in the industry, COFCO Group's asset injection into the company in the first half of 2018 is progressing smoothly. After the capital injection is completed, the company will have a fuel ethanol production capacity of 1.35 million tons, accounting for 47% of the country's current total production capacity, taking the lead in benefiting from increased industry demand. The trade war situation is tense, and the price advantage of imported fuel ethanol may decrease. As of a few days ago, the trade war between China and the US has experienced two rounds of counterattacks. Beginning on August 21, the US will hold a six-day hearing. If the hearing passes the 200 billion US dollar tax plan, China may take counteraction measures, or increase tariffs on fuel ethanol from the US by 25%. The tax price of fuel ethanol imported from the US will rise to 7,920 yuan/ton, an increase of 45.75% over the average price for the first quarter. The low level of prosperity in the citric acid industry affects the company's overall performance. In the first half of 2018, the company's citric acid business accounted for about 12% of revenue. China is a major producer and exporter of citric acid. The export volume in 2017 was 916,300 tons, ranking first in the world, and the industry has excess capacity. In the first half of the year, prices of domestic products fell and prices of raw materials rose; the appreciation of foreign dollars caused the financial expenses of the company's Thai subsidiary to increase, and net profit fell 61.92%. The impact of asset injection is maintained without considering the impact of asset injection for the time being. The EPS for 2018-2020 is expected to be 0.57, 0.63, and 0.69 yuan respectively, corresponding to the closing price of 9.71 yuan on August 27, and PE at 17, 15, and 14 times, respectively, maintaining the increase in holdings rating. Risk warning: fuel ethanol promotion progress falls short of expectations; tariff increases fall short of expectations; restructuring has failed.