Investment highlights: Lily: A leading enterprise in the organic pigment industry. The company is mainly engaged in R&D, production, sales and service of organic pigments and related intermediates. Currently, the company is a leading enterprise with leading overall competitiveness in the domestic organic pigment industry. The production scale, technical level and product quality of organic pigments are at the leading level in the country, and the share of high-performance organic pigments in the domestic market is in a leading position. The company's main products are high-performance and traditional azo organic pigments, including organic pigments such as quinacridone, pyrrolopyrrole dione, chromophenol, chromored, diazoyellow, etc., as well as 2-3 acid, chromophenol AS series, DB-70, DMSS and other related intermediates. High-performance, environmentally friendly organic pigments have become the future profit growth point of the industry. Currently, the global production ratio of high-performance organic pigments is about 10-12%, but the sales ratio has reached about 25-30%. 55% of the world's organic pigment consumption is concentrated in the ink sector. In recent years, with the rise of global manufacturing activities, the use of high-performance environmentally friendly inks and packaging and printing inks has been increasing year by year. From 2009 to 2016, the compound annual growth rate of gravure ink production in China was 9.38%, and the compound annual growth rate of the market size was 11.86%, driving the increase in market demand for organic pigments for high-performance inks. Fluctuations in raw material prices continue to affect the company's profitability. The company's raw material costs account for more than 73% of the company's main business costs, so fluctuations in raw material prices have an obvious impact on the company's operating results. In 2017, the spot price of North Sea Brent crude oil rebounded 24.2% from the previous year, driving the price of the company's benzene series raw materials to rise. The cost of the company's raw materials increased by 17.82%, while the price of the product increased by 4.65%. The increase in product prices was far less than the increase in raw material costs. There was a lag in product price adjustments, causing the gross margin of the company's main business to drop 4.48 percentage points from the previous year. The company acquired Hangzhou Foward to develop the pearlescent pigment market. The company acquired 55% of Hangzhou Furward Fine Chemical Co., Ltd.'s shares with 62.3 million yuan in cash in 2018, and Forward Chemical became the company's holding subsidiary. The company incorporated pearlescent pigments into the sales system, broadened the types of pigments sold, and opened up new application areas and markets. Profit forecasting and valuation. We estimate that the company's net profit for 18-20 years will be 200 million yuan, 251 million yuan, and 293 million yuan, respectively, and the corresponding EPS will be 0.89 yuan, 1.12 yuan, and 1.30 yuan, respectively. Considering that the company is a leading enterprise in the organic pigment industry, and that 3,000 tons of production capacity have not yet been fully released, we believe that the company's profitability will further increase in the future with the release of new production capacity. We gave the company an 18-year 16-18 times valuation range, corresponding to a reasonable value range of 14.24-16.02 yuan. First coverage, giving a “neutral” investment rating. Risk warning. Raw material price fluctuations; exchange rate fluctuations; production safety risks; environmental risks.