Incidents: COFCO Biochemical released its 2018 three-quarter report. In the first half of 2018, it achieved operating income of 5.03 billion yuan, an increase of 9.26% over the previous year; net profit attributable to shareholders of listed companies was 340 million yuan, an increase of 57.59% over the previous year; and earnings per share of 0.35 yuan. Comment on the rise in oil prices supporting fuel ethanol sales prices and driving high performance growth. International crude oil prices rose again in the second half of the year. The highest oil price once rose to 86 US dollars/barrel. From January to September this year, the average oil price was 72 US dollars/barrel, up 38% from the same period last year. As an important reference standard for fuel ethanol sales prices (fuel ethanol sales reference price = No. 93 gasoline price*0.9111), domestic gasoline prices also followed an increase. As of October 28, No. 93 gasoline had risen from 6838 yuan/ton at the beginning of the year to 8882 yuan/ton, a cumulative increase of 30%. According to estimates, for every 100 yuan/ton increase in the price of No. 93 gasoline, the net profit of fuel ethanol manufacturers will theoretically increase by 53 yuan/ton. The continued rise in oil prices will drive fuel ethanol prices to follow suit, and the company has benefited significantly. Policies are heating up frequently, and the promotion of fuel ethanol across the country has gone one more city. According to the plan, ethanol gasoline will be promoted nationwide in 2020. Based on 10% fuel ethanol addition, fuel ethanol demand will reach 12 million tons at that time. On the supply side, the current production capacity of fuel ethanol is less than 3 million tons, the proposed building/construction capacity is only 4 million tons, and there may be a supply and demand gap of 5 million tons. In August, the National Standing Committee decided to expand the promotion and use of ethanol gasoline for vehicles. In addition to the original 11 pilot provinces, it will be further promoted in 15 provinces including Beijing this year. Tianjin took the lead in completing the city-wide promotion of ethanol gasoline this month, launching the first round of national promotion of ethyl alcohol gasoline. The company took this opportunity to actively expand sales channels and set up a subsidiary in Tianjin in July to expand the fuel ethanol business. The early deployment advantage was obvious. The restructuring progressed steadily, establishing the leading position of fuel ethanol. In order to eliminate competition in the industry, COFCO's asset injection into listed companies is progressing smoothly. After the capital injection is completed, the company's fuel ethanol equity production capacity will exceed 1.3 million tons, accounting for 48% of the country's current total production capacity, and will be the first to benefit from increased industry demand. The profit forecast does not take into account 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 8.16 yuan on October 26, and PE at 14, 13, and 12 times, respectively, maintaining an increase in holdings ratings. Risk warning: the promotion of fuel ethanol fell short of expectations; oil prices fell sharply; restructuring failed.