Event: The company released its 2018 annual report. We achieved annual revenue of 1,813 billion yuan, an increase of 20.0% year on year; realized net profit of 190 million yuan, an increase of 42.53% year on year; realized net profit without deduction of 165 million yuan, an increase of 60.72% year on year. Key investment points: Raising new production capacity contributed to an increase in the volume and price of organic pigments. In March 2018, the “5,000 ton environmentally friendly organic pigment project” raised by the company was officially put into production. Currently, it has 37,300 tons of pigment production capacity. The products cover organic pigments and pearlescent pigments. The scale is the second largest in the industry, with a market share of about 12%. With effective breakthroughs in production capacity bottlenecks and product structure adjustments, the company's organic pigments achieved a sharp rise in volume and price during the reporting period. A total of 3,3015 tons of various organic pigments were sold, up 2.7% year on year, and the average sales price increased 16.8% year on year to 51,800 yuan/ton. In addition, another part of the fund-raising project “3,000 tons of high-performance organic pigments” is expected to be officially put into production in June 2020, which will continue to have a positive impact on the company's profits. Improve self-supply of intermediates and establish a complete self-supporting industrial chain. Environmental protection regulations in recent years have caused many upstream enterprises that do not meet environmental requirements to stop production or limit production, which directly affects supply quantity and price. The quality and supply stability of intermediates is critical to pigment production. In recent years, the company has not only participated in the construction of intermediate manufacturers, participated in Inner Mongolia Meilijian New Materials Co., Ltd., but also actively invested in the development of intermediates. During the reporting period, the company's intermediate 2.3 acid, DB-70, DMSS, 4-chloro-2,5-dimethoxyaniline (4625), and chromophenol series were basically self-sufficient, and established a relatively complete product chain self-supporting system. Safety supervision in the chemical industry has been strengthened, and leading regulatory companies have benefited for a long time due to the recent Xiangshui incident. Environmental protection and safety supervision efforts in the domestic chemical industry have been strengthened again. It is expected that a new round of chemical supply-side reforms will begin, which will truly force chemical enterprises to achieve sustainable transformation and upgrading. The concentration of enterprises in China's organic pigment industry is not very high. The country has nearly 100 enterprises producing organic pigments, and the Yangtze River Delta region concentrates key pigment production enterprises in China, such as Changzhou North America, Lily Flower, Shuangle Pigments, and Jiangsu Liwang. The profit forecast and rating estimates that the company's EPS for 2019 to 2021 will be 1.09 yuan, 1.31 yuan, and 1.55 yuan respectively. Corresponding to the latest closing price PE will be 23 times, 19 times, and 16 times, respectively, maintaining the “recommended” rating. The risk indicates that raw material prices fluctuate greatly; the withdrawal of backward production capacity falls short of expectations