Key investment events: The company released a quarterly report, achieving revenue of 524 million yuan, a year-on-year increase of 22.73%; net profit of 58.6 million yuan, a year-on-year increase of 14.53%; net profit after deduction of 43.75 million yuan, an increase of 11.48% year-on-year. Revenue growth in the first quarter exceeded expectations, and product structure changes led to a decline in gross margin: the company's Q1 revenue growth rate rose markedly, significantly higher than other companies in the same industry, better than expected, but because gross margin continued to decline, down 2.79 pct from Q4 and 2.7 pct from year to month, down 2.7 pct from year to month, we judge that mainly Q1 revenue declined seasonally, and the utilization rate declined further. On the other hand, the share of industrial products with low gross margin in the company's product structure may have increased; the year-on-year decline was due to product price adjustments that began in Q2 in '18 In Q4 '18, there was a decline in industry demand, price adjustments were blocked, and raw material prices had not been significantly reduced, resulting in weak profitability. On the cost side, compared to the same period last year, the increase in financial expenses also dragged down the profit growth rate. Looking ahead to the later stages, we expect that prices of raw materials may be reduced, while the company's self-sufficiency rate will increase. At the same time, after removing inventory in some downstream industries in the first quarter, demand may rise again in the second quarter, which is expected to drive a steady recovery in profitability. High-end products have made steady breakthroughs, and import substitution has driven long-term growth: with mass production of high-end products such as solid-state capacitors (revenue growth of nearly 30% in 2018) and MLPC, the middle and high-end market breakthroughs have now emerged, and it is the general trend to gradually replace Japanese in the future. Comparatively speaking, although Japanese manufacturers account for more than 50% of the market, their main factories are on the mainland, and the cost side disadvantage is obvious. Profit pressure has gradually shrunk to high-end fields such as communications, industry, and automobiles in order to stabilize profitability, and industry transfer brings a lot of room for growth to domestic leaders. The company also continued to break through new heavyweight customers and reduced the dividend ratio in 2018, laying the foundation for subsequent capital expenditure. The projects under construction increased markedly, indicating that the construction progress of the company's new plant has accelerated markedly. It is expected that starting in 2020, it is expected that it will contribute to growth. It is worth looking forward to the company's further penetration in the fields of communications and industry in the future. Build a new intelligent chemical plant and continue to strengthen core competitiveness. The company has equipment factories. The new production capacity of the five plants is built according to the latest automation standards. Based on an annualized production capacity of 200 million units, the full production capacity is less than 300 people. The corresponding per capita output has more than doubled compared to now. The new early-stage debt fund-raising plant is designed according to this standard. After production is put into operation at the end of 19, labor costs are expected to decrease at the same time as revenue increases, and the profitability center is expected to rise. Investment suggestions: The revenue growth rate for the first quarter exceeded expectations, and subsequent profitability rebounded, which is expected to drive up profit growth, while also speeding up import substitution of middle and high-end products and opening up long-term growth space. We expect the company's net profit in 2019/20/21 to be 3.60/4.69/583 billion yuan, EPS is 0.92/1.20/1.50 yuan, a growth rate of 20.3%/30.1%/24.5%, corresponding PE is 20.4/15.7/12.6 times, “buy” rating. Risk warning: Production capacity release progress is low expectations, and high-end market expansion is not expected.