Report summary: Integrated layout of the entire industry chain, steady growth in net revenue and profit. Chaohua Technology is mainly engaged in R&D, production and sales of CCL, PCB and its upstream related products such as electrolytic copper foil. It is the only vice chairman unit spanning the three major industry associations of copper foil, copper clad board, and printed circuit board (PCB). It is one of the important developers of PCB industry standards, and has been rated as an outstanding national brand in the PCB industry for four consecutive years. The company's revenue in 2013 was 930 million yuan, 2017 was 1,439 million, and the compound annual growth rate was 11.53%, mainly benefiting from the increase in downstream PCB demand; the company's net profit was 37 million yuan in 2013 and 47 million yuan in 2017, with a compound annual growth rate of 6.16%. Both supply and demand drive the growth of upstream demand. On the demand side, new energy vehicles are driven by national policies. From 2014 to 2017, the three-year compound growth rate of production and sales volume was 116.72% and 118.00% respectively. 5G millimeter waves and large-scale antennas increased PCB demand costs, and the unit price of high-end smart phone innovations and upgrades increased, stimulating an increase in the output value of the entire PCB market. On the supply side, under environmental pressure, some domestic non-compliant industrial chain enterprises in the Pearl River Delta, Yangtze River Delta and other regions have been subject to corresponding production cessation or production restrictions. The utilization rate of domestic copper foil production capacity is at an all-time high, reaching 89.49% in 2017. The top ten global rigid copper clad plate companies in 2017 accounted for 74% of the total industry. The concentration level is relatively high. The top ten PCB manufacturers accounted for 61%, and the concentration level is relatively low. With the “vertical integration” industrial chain layout, the scale of production capacity continues to expand. In recent years, the company has adhered to the “vertical integration” industrial chain development strategy and formed a relatively complete product line from electrolytic copper foil and CCL to PCB. At present, the company continues to improve its industrial layout and continue to expand production capacity: the second phase of the high-precision electronic copper foil project is expected to begin commissioning by the end of the year. The project will increase the production capacity of about 8,000 tons of high-precision electronic copper foil, at which time the total production capacity will exceed 20,000 tons; at the same time, the company plans to build an electronic information industry base in Meizhou. Maintain the “Overweight” rating. We expect the company's EPS in 2018-2020 to be 0.12, 0.17, and 0.29 yuan respectively, and the corresponding PE is 43.70, 30.51, and 17.21 times respectively, maintaining the “increased holdings” rating. Risk warning: The progress of copper foil construction falls short of expectations.