Matters: Recently, the company has successively obtained 10% shares in Changzhou Gelin Photoelectric New Materials Co., Ltd. and 34.5% shares of Changsha Xinyu Polymer Technology Co., Ltd. Among them, the actual controller of Gelin Photoelectric (who is also the actual controller of the listed company) promised to inject its shares into the listed company by deducting non-net profit in due time for 2 consecutive years. Guoxin Chemical & Electronics Industry Views: 1) The company is currently a leading enterprise in the field of special chemicals for photoresist in the world, forming a mesh product category in the three fields of PCB, flat panel display, and semiconductor, ahead of the same industry in China; 2) The downstream application field of the product has maintained steady growth in global demand for photoresist, and the growth rate of the Chinese market is higher than the global level; 3) The company has continued to expand upstream and downstream in recent years, laying room for long-term growth. In recent years, the company has expanded upstream and downstream of the industrial chain through acquisitions, joint ventures, and shareholding. While solving the supply of important raw materials, the company has increased the variety of products to complement each other. Last year, the listed company took a stake in Gelin Optical, which is owned by the actual controller. The latter also developed UV light-curing inks and coatings with light curing as the core technology, which are widely used in high-end printing and coatings, and have good development prospects; 4) Investment suggestions: Don't consider Greene's integration into expectations for the time being, and give it an “increase in holdings” rating. The company's listed fund-raising project has already been put into operation. It is expected that production will gradually reach full production in 18-20. The project under construction by the subsidiary Qiangli Yulai has basically been completed, and volume sales are expected to begin in 2019. At the same time, taking into account the expectations of the shareholding company Greene Photoelectric's integration into the listed company, and the fact that the listed company's 2018 fixed increase project is under construction, new products and new production capacity will still be put on the market for the next 3-5 years. We expect the company to return net profit of 147/1.87/242 million in 18-20, corresponding to EPS of 0.57/0.73/0.94 yuan, and PE corresponding to the current stock price of 51.2/40.2/31.1X, covering the first time, a “increase in holdings” rating. Comment: The company has a leading position in the field of photoresist specialty chemicals. The company is a leading company in the field of photoresist specialty chemicals in the world. The main business of Qiangli New Materials is the R&D, production and sales of special chemicals for photoresists in electronic chemicals and related trade business. The company holds core independent intellectual property rights and has strong independent innovation capabilities. According to the downstream application area of the product, the company's main products can be divided into photoresist photoinitiators and resins for PCBs, photoresist photoinitiators for LCD liquid crystal displays, photoresist photoinitiators for semiconductors, and photoresist photoinitiators for other uses. In recent years, the company has been widely deployed upstream and downstream in the field of electronic chemicals. Currently, it has formed a mesh product category in the three fields of PCB, flat panel display, and semiconductor, ahead of the same industry in China. The company has maintained a high level of R&D investment for many years, expanding its leading position in the photoresist specialty chemicals industry. The company is one of the few enterprises with a large number of core technology patents in the domestic fine chemical field. It mainly benefits from the company's extensive investment in product technology research and development for many years since its establishment. The company went public in 2015. From 2012-2017, the company's R&D expenses accounted for an average of 6.51% of total revenue, and reached 6.63% in the first three quarters of 2018. The company's investment ratio in R&D expenses is among the highest among listed companies in the chemical sector. In 2017, the average R&D expenditure of listed companies in the chemical industry was 3.20% of total operating income, and the company's R&D investment clearly exceeded the industry average. Also, as of December 2018, the number of patents applied for by the company reached 199, and the number of authorized patents reached 48. Benefiting from the rapid development of the downstream industry chain, the demand for photoresist is growing rapidly. Currently, the company's products are mainly used in the three fields of PCB, flat panel displays, and semiconductors. According to data released by the Radiation Curing Committee, China's photoresist market has grown from 2.69 billion yuan to 5.17 billion yuan from 2010 to 2015, with a compound annual growth rate of 14.0% (the global compound growth rate during the same period was 5.8%). The domestic photoresist market is already developing faster than the world. In 2015, China's photoresist demand accounted for 11.3% of global demand, and consumption in 2015 reached 101,000 tons.Furthermore, according to the forecast of Zhiyan Consulting, the future will benefit from the rapid development of the domestic LCD panel and semiconductor industries. It is estimated that China's photoresist demand will reach 2.72 million tons in 2022, 2.7 times that of 2015, with a compound annual growth rate of 15.2%. Judging from the industry space in the three downstream application areas of the company's products, it will maintain a steady growth rate globally in the future, and demand for photoresist will maintain a compound growth rate of at least 6%. We expect that in the context of the shift of the global electronics industry chain to China, the domestic market demand for photoresists will increase significantly above the global average. PCB field: As an indispensable component in electronic products, the demand for PCBs is showing a steady growth trend. According to Prismark data, global PCB output increased from US$41.2 billion in 2009 to US$58.8 billion in 2017, with an average compound annual growth rate of 4.55%. The year-on-year growth rate of global PCB output in 2017 was 8.60%. The share of China's PCB output value in global PCB output increased from 31% in 2008 to 51% in 2017. The absolute value of China's PCB output increased from US$15 billion in 2008 to US$29.7 billion in 2017, with a compound annual growth rate of 9%. The year-on-year growth rate of China's PCB output in 2017 was about 10%, surpassing the overall growth rate of global PCB output. Driven by 5G, with the expansion of production by domestic PCB manufacturers, the global PCB output value is expected to reach 68 billion US dollars by 2022, the compound annual growth rate for the next three years will reach 3%, the strong domestic PCB output value is expected to reach 35.7 billion US dollars, and the compound annual growth rate for the next three years will reach 6.3%. Drive the global PCB photoresist market from US$1.8 billion in 2015 to around US$2.2 billion in 2018, and maintain a compound annual growth rate of 6% in the future. Flat panel display field: As domestic panel manufacturers have continued to increase panel investment over the past ten years and build multiple production lines one after another, China's panel production lines have continued to advance towards larger size and higher end. According to data from Zhiyan Consulting, the global LCD panel shipment area reached 181 million square meters in 2017, a threefold increase compared to 2007, with an average annual increase of about 13 million square meters. According to estimates by the Guoxin Electronics Industry Research Group, global demand for LCD panels will reach 210 million square meters by 2020, and the CAGR from 2017 to 2020 is about 5.1%. It is estimated that more than half of the world's high-generation line production capacity will be concentrated in mainland China. The domestic LCD panel shipment area will increase from 68 million square meters in 2017 to 105 million square meters in 2020, with a compound annual growth rate of 15.6%. Global LCD photoresists grew from US$1.96 billion in 2015 to around US$2.4 billion, and will maintain a compound annual growth rate of 6-7% in the future. Semiconductor sector: According to WSTS data, benefiting from the explosion of memory and the increase in demand for the Internet of Things and sensors, etc., the global semiconductor market sales reached 412.2 billion US dollars in 2017, with a year-on-year growth rate of 21.6%. Global semiconductor sales are expected to reach 550 billion US dollars by 2021, with a compound annual growth rate of 7.5%. According to data from the China Business Industry Research Institute, the sales volume of the semiconductor market in China in 2017 was 720 billion yuan, a year-on-year growth rate of 13.7%. We expect that as the global semiconductor industry continues to shift domestically in the future, the sales volume of the Chinese semiconductor market will reach 1106.7 billion yuan by 2021, with a compound annual growth rate of 11.3%. The size of the global photoresist market for semiconductor manufacturing will grow from US$1.77 billion in 2015 to US$2.3 billion in 2018, and will maintain a compound annual growth rate of 6-7% in the future. The company has made frequent moves along the upstream and downstream industrial chains, creating room for long-term growth. Since going public in 2015, the company has laid out and improved the upstream and downstream industrial chains many times. Since the company went public in 2015, it has actively improved the upstream and downstream of the industrial chain through many mergers and acquisitions, joint ventures, and shareholding, and leveraging its technological advantages to expand new products. In terms of upstream raw materials, the company acquired Jiaying Photosensitive Materials Technology Co., Ltd. in 2016 through cash and additional shares, which solved the problem of raw materials for the production of special chemicals for photoresists. In 2016 and 2017, Jiaying Photosensitive successfully completed the performance promises made during the acquisition. In terms of product range expansion, 1. In August 2016, the company established Changzhou Qiangli Yulai Optoelectronics Technology Co., Ltd. in a joint venture with Taiwan's Yulai Optoelectronics R&D team to develop, produce and sell OLED material products; 2. The company increased the production capacity of semiconductor photoresist initiators after increasing capital in Taixing Xianxian Chemical in February 2017 to obtain 51% of shares; 3. In August 2018, the company obtained 10% of Changzhou Gelin Photoconductive New Materials Co., Ltd. with 12 million yuan, and its actual controller promised to continue for 2 consecutive years It realized that the non-net profit was deducted in time to inject its shares into listed companies. Gelin Photosensitive's main products are light-curing materials and photosensitive materials, which are used to support the light-curing ink, paint, adhesive and other industries; 4. In October 2018, the company increased its capital by 60 million yuan to Changsha Xinyu Polymer Technology Co., Ltd., while also transferring part of the shares for 24.4997 million yuan, and finally obtained 34.5% of the shares in Changsha Xinyu. The latter is the largest manufacturer of photosensitive initiator series products in China, which can effectively complement the company. What needs to be explained in particular is that the UV light-curing inks and coatings produced by Gelin Photosensitive have huge application space in China. Among them, UV light-curing coatings have the advantages of not containing volatile organic compounds (VOC), low environmental pollution, fast curing speed, energy saving, good curing product performance, and being suitable for high-speed automated production. UV light-curing ink has bright colors, good printability, fast curing and drying rate, and environmental performance. At the same time, it has good adhesion, and has characteristics such as wear resistance, corrosion resistance, and weather resistance. At present, UV ink has covered all printing fields, but since the price is higher than that of solvent-based inks, it is currently mainly used in the packaging and printing of high-end printed materials such as cigarettes, alcohol, cosmetics, health products, food, medicine, etc. Due to the high technical threshold of light-curing inks and coatings, huge product demand, and high gross margin, we expect that after the product is successfully marketed and sold, Green Photoelectric's actual controller (who is also the actual controller of powerful new materials) will inject its shares into the listed company as promised. If the injection is successful, we believe that the company's profit scale will be greatly expanded in the future. Investment suggestion: Without considering Greene's photosensitive integration expectations, the fund-raising project that gave the “increased holdings” rating company was successfully put into operation when it went public in 2015. According to the plan, the company has formed a production capacity of 1,535 tons/year of photoresist special chemicals and 6,760 tons/year of photoresist resin. According to the progress of market development, it is expected that production will gradually reach full production in 19-20. According to the financial statements for the third quarter of 2018, the clean room construction and decoration project of Qiangli Yulai Optoelectronics, the company's holding subsidiary, has been completed and improved, and it is expected that sales of OLED material products have been successfully achieved in the fourth quarter. In addition, the company's 2018 fixed increase project “3070 tons of key raw materials and R&D center project for next-generation flat panel display and integrated circuit materials” is currently under construction. Without considering the impact of Greene's merger expectations on the company's performance, we expect the company to maintain an average growth rate of about 30%, 15%, and 30% in the fields of flat panel displays, PCBs, and semiconductors in the next three years. We expect the company's net profit to be 1.47/1.87/242 million in 18-20, corresponding to EPS of 0.57/0.73/0.94 yuan, corresponding to the current stock price PE of 51.2/40.2/31.1X, covering the “increase in holdings” rating for the first time.