Incident Company released its 2018 three-quarter report. The first three quarters of 2018 achieved operating income of 1,203 billion yuan, a year-on-year increase of 13.02%; net profit attributable to shareholders of the parent company was 228 million yuan, an increase of 36.78%; and basic earnings per share of 1.26 yuan. The results of the three-quarter report are generally in line with our previous expectations. Review the company's performance is growing rapidly, and profitability continues to improve. In the 2018 Q3 quarter, revenue and net profit increased 18.11% and 41.36% year-on-year respectively, up 4.6 and 1.9 percentage points from the year-on-year growth rate of the Q2 quarter in 2018. The gross margin and net profit margin for the first three quarters were 40.7% and 25.9% respectively, up 3.84 and 4.58 percentage points from the same period last year. Prices of fungicides such as promycin and pyrimidine have continued to rise. The price of promycin has risen from 36,750 yuan/ton in the same period last year to now, 53,000 yuan/ton; the price of pyrimidine has risen to a four-year high of 380,000 yuan/ton. The company has a production capacity of 14,000 tons of chlorpyrimidine (second in the country) and 2,500 tons of pyrimidine raw materials (first in the country), fully benefiting from the increase in revenue and profitability brought about by rising drug prices. Additional production capacity for pyrimidine and flame retardants was gradually released. The primary drug project with an annual production of 1,000 tons of pyrimidine was completed in the first half of the year, and it is expected that the volume will gradually increase. The 1500 tons of melamine polyphosphate and 10,000 tons of compound masterbatch projects will also be completed and put into operation within the year, and the flame retardant product line will continue to expand. In addition, the prices of the company's flame retardants and flame retardant intermediates rose 18.29% in the first three quarters. Prices on the cost side were stable, and gross margin was also expected to increase. Exchange earnings have increased, the period fee ratio has been further reduced, and cash flow continues to be stable. The appreciation of the US dollar against the RMB in the current period led to an increase in exchange earnings. The company's financial expenses for the first three quarters were 1.05 million yuan (11.32 million yuan in the same period last year), and the period fee rate was 9.66%, down 2.67 percentage points from last year. The company's cash flow from Q1, Q2, and Q3 operating activities in 2018 was 1.13, 1.13, and 115 million yuan respectively, and the cash flow continued to be steady. By the end of the third quarter, the company's monetary capital was 1,213 billion yuan, and there was plenty of capital for follow-up projects. Profit prediction The company is a high-quality enterprise in the small but beautiful pesticide segment, which has fully benefited from the increase in profit brought about by rising prices of fungicides such as probiotin; fund-raising projects will be intensively produced this year and next two years, and endogenous growth momentum is strong. The estimated operating income for 2018-2020 is 1,691 billion, 2.123 billion, 2,516 billion yuan, and 2,516 billion yuan, EPS is 1.65, 2.00, and 2.31 yuan/share, and corresponding PE is 12.3X, 10.1X, and 8.8X. Maintain the “Overweight” rating. Risk warning: Product development progress falls short of expectations; product certification cycle exceeds expectations, etc.