The results for the first three quarters of 2018 were in line with expectations. Meiyingsen announced the results for the first three quarters of 18 years: operating income of 2,329 billion yuan, up 16.15% year on year, net profit of 293 million yuan, up 18.25% year on year, corresponding to earnings per share of 0.19 yuan/share, in line with market expectations. On a quarterly basis, Q1-Q3's operating income achieved a growth rate of 22.6%/8.0%/18.7%, respectively, and net profit growth of 56.7%/0.2%/14.7%, respectively. The company forecasts a profit growth rate range of 15-30% for the whole year. Development trend 1. The downstream industry has entered a peak season, and the revenue growth rate in the third quarter increased month-on-month. The company achieved a 10.2% increase in operating income in the first three quarters. Among them, the growth rate increased by 18.7% in the single third quarter. The main driving forces were: 1) the diversified customer development situation was good, and downstream consumer electronics, food, liquor, logistics packaging, etc. entered the peak season; 2) the growth elasticity of new customers was high, including HomeDepot, JD, Xiaomi, and NetEase; 3) the capacity utilization rate of the four major manufacturing platforms in Shenzhen, Dongguan, Suzhou and Chongqing increased, and the Dongguan Phase II smart factory was gradually put into use. 2. Appropriate cost control and stable profitability. The gross profit margin for the first three quarters was 32.22%, down 1.98ppt from the previous year. We expect that this is mainly due to factors such as the fact that new production capacity is still climbing, new customers are still in the volume phase, and raw material prices are rising in the first half of the year. The sales+management+R&D expense ratio for the first three quarters was 17.28%, down 1.36ppt from the previous year. Expenses were properly managed. Overall, the net interest rate increased by 0.22ppt to 12.59% year on year. Looking backwards, as upstream paper prices fall, new downstream customers increase, and capacity utilization increases, the company's operating performance is expected to continue to rise. 3. Be optimistic about the medium- to long-term positive momentum brought about by the implementation of the three new strategies. 1) New customers: Actively provide good services to strategic customers, growing customers, consumer customers, R&D and manufacturing customers, etc., where the growth rate of new customers such as Mengniu and Backgammon can be expected; 2) New businesses: new businesses such as labels and electronic functional material die-cutting provide value-added services to downstream customers such as consumer electronics, enhance the company's downstream customer order development capabilities, while further exploring the elasticity of individual customer revenue growth; 3) New production capacity: Relying on the existing four major manufacturing bases, Dongguan Phase II smart factories are gradually put into operation. It is expected that Chengdu, Suzhou, Changsha, and Lu'an will be built in the future Expansion of production capacity and commissioning of production can be expected. Profit forecast We maintain our earnings forecast of 0.28/0.37 yuan/share per share for the full year of 2018/19 unchanged. Valuation and recommendations Currently, the company's stock price corresponds to 16 times /12 times P/E in 2018/19. We maintain our recommended rating and target price of RMB 6.50, which is 43% upward from the current stock price, corresponding to 18 times P/E in 2019. Prices of risky raw materials fluctuate sharply; competition in the industry continues to intensify.