Incident The company released its 2018 three-quarter report on the evening of October 22. The company achieved revenue of 1,056 million yuan in the first three quarters, up 189% year on year; net profit to mother of 494 million yuan, up 1337% year on year; deducted non-net profit of 495 million yuan, up 1234% year on year; and net cash flow from operating activities was 446 million yuan, up 950% year on year. Among them, 2018 Q3 achieved revenue of 413 million yuan in a single quarter, up 214% year on year and 12% month on month; net profit to mother of 210 million yuan, up 1347% year on year, up 24% month on month; after deducting non-net profit of 205 million yuan, up 1248% year on year, up 16% month on month. The company's cumulative net profit for the full year of 2018 is expected to increase sharply compared with the previous year. Short review: tight supply and demand for main products boosted a sharp increase in performance during the reporting period, mainly due to the rapid year-on-year increase in the volume and price of the company's main products, especially ODB-2 and m-aminophenol: 1) Prices of ODB-2 and m-aminophenol rose sharply, from last year's 100,000 yuan/ton price and 70,000 yuan/ton to the current sales price of the company's 50-600,000 yuan/ton and 20-240,000 yuan/ton respectively. -500% and 186-243%; of these, the overall gross margin for the first three quarters reached 64.0%, an increase of 37 percentage points over the previous year; 2) Since the company met environmental standards and prepared its own raw materials of p-aminobenzenesulfonic acid, ODB-2 and m-aminophenol were basically able to achieve a high operating rate, which also led to an increase in the company's sales volume. In terms of three fees, sales, management, and finance expense ratios for the first three quarters were 0.93%, 5.18%, and -1.39%, respectively, changing -0.49, -6.39, and -1.93 percentage points, respectively. The sharp decline in management expenses was mainly due to changes in accounting standards and separate listing of R&D expenses. Industry pattern reshaping+high environmental barriers. The ODB-2 boom is expected to be maintained. Although Raikang and Shandong Shouguang Fukang, which were affected by environmental issues in the early stages, the price of ODB-2 did not fall. We believe that ODB-2 had a continuous bear market for nearly 10 years before 2017, and the industry cleared up a lot. Currently, there are only 4 companies in production in the world: Kangaite, Fukang, Jianxin, and a Japanese company. The industry pattern has fundamentally changed and has become a highly concentrated oligopoly industry, ODB- The high price of 2 can be maintained for a long time. In terms of additional production capacity, on the one hand, ODB-2 is difficult to obtain approval for new production capacity in the context of stricter domestic environmental protection due to high environmental barriers; on the other hand, due to the long synthesis steps, even if new production capacity is introduced from abroad, it will take a long time to start production, so the industry pattern will not change in a short period of time, and the OBD-2 boom is expected to be maintained. High investment is a barrier to casting. Under high policy pressure, the company's environmental protection advantages show that the company maintains a high level of investment. In recent years, it has invested a large amount of money in environmental protection work every year. A total of 3 process modifications have been carried out in environmental protection facilities. This year, environmental protection investment has exceeded 50 million yuan, greatly improving wastewater treatment capacity. Recently, the company's regenerative thermal incinerator (RTO) spray drying exhaust treatment demonstration device has been put into trial operation, which has effectively solved the emission efficiency problem in some workshops; the 3D electrode oxidation technology treatment device for high-salt sewage has also entered the equipment installation stage. Against the backdrop that environmental policies are not expected to be relaxed, competitors will continue to be impacted by environmental policies in the short term, and the company's successive commissioning of environmental protection devices will help the company improve its ability to cope with environmental policies and benefit from environmental pressure. A new subsidiary of Ruixiang Chemical will be established to continue to promote a diversified and complementary profit model. The company announced on June 13, 2018, that it decided to use its own capital to invest in the establishment of a wholly-owned subsidiary “Cangzhou Jianxin Ruixiang Chemical Technology Co., Ltd.” (tentative name), which mainly produces and sells electronic chemicals, new materials, pharmaceutical chemicals, biopharmaceuticals, etc., while the company itself reserves 3,3'-diaminodiphenyl sulfone and 4,4'-diaminodiphenyl sulfone are special curing agents for preparing composites. We believe that the establishment of the company's subsidiary superimposes the company's own Technical reserves are expected to continue to break through in the fields of pharmaceutical intermediates and new materials in the future, providing a continuous guarantee for the company's diverse and complementary profit models. Risk warning: macroeconomic downturn, production safety risks, expansion of overseas enterprises. The company's net profit for 2018 and 2019 is estimated to be 720 million yuan and 83 million yuan, respectively, corresponding to EPS 1.32 and 1.52 yuan, PE 9.6X and 8.4X, maintaining the purchase rating.