Investment points: Leading upstream specialty chemicals for photoresists: The company is mainly engaged in the development of special chemicals for photoresists. The main products are photoinitiators and photoresist resins, including the three main application fields of PCB, LCD and semiconductor. It supplies global photoresist leaders Asahi Kasei, Hitachi Chemical, Changxing Chemical, etc. The overall gross margin of products has reached about 45%, and the gross profit margin of high-end LCD products is as high as 70%. With the launch of fund-raising projects, chemical production capacity in the LCD and semiconductor fields will gradually be released, and revenue and profit will reach a new level, supported by the three major fields The company is growing rapidly. There is plenty of room for localization of photoresist, and upstream core raw materials continue to benefit: integrated circuit localization, design, manufacturing, packaging, materials and equipment must develop collaboratively. Photoresists in the materials field and equipment lithography machines are a problem in the evolution of global integrated circuit technology. Judging from the development trajectory of foreign electronic materials, by supporting the development trajectory of domestic integrated circuits, the materials sector is expected to catch up. 1) The global photoresist market is nearly 35 billion yuan, the Chinese market is nearly 10 billion yuan, with annual growth of more than 10%. The level of localization is seriously insufficient. The PCB field is rapidly following up. The LCD and LED fields support the current rapid development of the domestic panel industry, which is expected to break through and achieve replacement. The technology gap in the semiconductor field is 2-3 generations, about 8-10 years, and there is huge room for future replacement; 2) Photoinitiators can basically achieve comprehensive coverage, and semiconductor photoinitiators have a lot of room for expansion; the photoresist resin field is currently awaiting production of LCD photoresist, semiconductor photoresist resins The market is yet to be broken through by the company; at the same time, the photoresist additives in the supporting department are still a market to be explored. With the gradual expansion of coverage, the company will become the photoresist specialty company with the most complete coverage in the world; 3) Price war after localization, concerns about declining gross margin: We believe that low-end products will inevitably experience the above phenomenon, but due to the lower cost of domestic enterprises and the geographical and industrial support advantages after the promotion of localization, mature products can still maintain a gross profit margin of more than 40%. From PCB to LCD to semiconductor, technical difficulties have gradually increased, and there is room for further improvement in gross margin. With the merger and acquisition of Jiaying Chemical, the path of epitaxial expansion opens up room for imagination: the company's acquisition of upstream raw material supplier Jiaying Chemical for 274 million yuan has, on the one hand, enriched the company's product line, on the other hand, brought performance growth, and on the other hand, it has also opened up a path of epitaxial expansion. It is hoped that in the future, it will enter the downstream photoresist field with wider market space through epitaxial mergers and acquisitions, etc., and the growth space will truly open up. Profit forecast: The acquisition of Jiaying Chemical is expected to be completed in 2016. Considering the increased performance brought about by the acquisition, the EPS after dilution in 15-17 is expected to be 1.09/1.75/2.43 yuan, respectively. Referring to the current valuation level and the scarcity of the target, it is given an “increase in holdings” rating. Risk warning: increased competition in the industry and project efficiency falling short of expectations, etc.