Report summary: A leading enterprise in the electronic substrate industry, with outstanding technology brand advantages. The company is mainly engaged in R&D, production and sales of CCL, PCB and related upstream products such as electrolytic copper foil. The company attaches importance to R&D investment and has obvious technical advantages. It is one of the few domestic manufacturers that has mastered the production technology of 6 micron lithium copper foil. In 2017, the company successfully developed a nano-paper-based high-frequency high-speed copper clad plate. This technology fills a gap in the country and will be widely used in the field of 5G communications. The capacity utilization rate is high, and the scale of production capacity continues to expand. Currently, the company's copper foil product line is in short supply. In 2017, the annual growth rate of the company's copper foil production for electronic circuits reached 72.3%, and the capacity utilization rate of the entire product line reached 100%. In the future, the company will continue to expand production capacity: the second phase of the high-precision electronic copper foil project is expected to begin commissioning by the end of the year, and the project will increase the production capacity of about 8,000 tons of high-precision electronic copper foil, at which time the total production capacity will exceed 20,000 tons; at the same time, the company plans to build an electronic information industry base in Meizhou, and the first phase plans to build a high-frequency high-speed copper foil project with an annual output of 20 million sheets. After all projects are put into operation, the company's copper foil production capacity will reach 40,000 tons and copper clad plate production capacity will reach 20 million sheets, which is expected to reach the highest level in the industry. The “vertical integration” industrial chain layout boosts gross margin. The company adheres to the “vertical integration” industrial chain development strategy and has formed a relatively complete series of product lines from electrolytic copper foil and CCL to PCB. The concentration of upstream copper foil and midstream copper clad plate industries is high, reaching 73% and 76% respectively, and manufacturers have strong bargaining power. The downstream PCB business undertakes upstream products and provides quality assurance to customers. At the same time, the company has increased the gross profit margin of PCB products through technological transformation and efficiency improvement, such as launching SAP, adjusting the organizational structure, and streamlining personnel. Covering the downstream high-quality customer base, the customer advantage is obvious. At present, the company has become a stable supplier for downstream high-quality listed companies and the top 100 leading enterprises in the industry (including domestic PCB listed companies other than Shennan Circuit, Jianding (second in China, sixth in the world), etc.), achieving both internal and external repairs, and customers cover high-quality domestic and foreign enterprises. Give it an “Overweight” rating. The company's 2018-2020 EPS is expected to be 0.08, 0.10, and 0.12 yuan respectively, and the corresponding PE is 43.57, 33.96, and 28.29 times, respectively, giving it an “increase in holdings” rating. Risk warning: Production capacity expansion has fallen short of expectations.