2019H1 net profit is expected to increase by 0%-15%. Performance is in line with expectations Strong New Materials released the 2019 semi-annual results forecast on July 12. The company expects net profit of 0.79-91 million yuan in 2019H1, an increase of 0%-15% over the previous year, and the performance is in line with expectations. Based on the latest share capital of 515 million shares, the corresponding EPS is 0.15-0.18 yuan. Corresponding to 2019Q2, net profit of 0.46 to 58 million yuan was achieved, an increase of 9%-37% over the previous year. We expect the company's EPS in 2019-2021 to be 0.37/0.44/0.51 yuan respectively, maintaining the “increased holdings” rating. The increase in sales of photoinitiators led to a steady increase in demand in the downstream PCB industry. Sales of the company's PCB photoresist specialty chemical products continued to rise, and the company's operating income increased compared to the same period last year, which led to an increase in net profit; the company's new product, OLED sublimation materials, were released, which also contributed to the growth of the company's performance. In addition, the company increased capital to acquire 34.5% of Changsha Xinyu's shares at the end of 2018, and Changsha Xinyu achieved a net profit of 42 million yuan in 2018. We expect that 2019 H1 will also provide the company with a certain increase in investment income. During the reporting period, the company's non-recurring profit and loss amount was about 4 to 6 million yuan, compared to 1.72 million yuan in the same period last year. The development prospects of the OLED materials business are good. Various projects are under construction. According to DSCC estimates, global OLED panel shipments will reach 9 million square meters in 2019, an increase of 35% over the previous year, corresponding to the OLED materials market size of about 10 billion yuan. As the production capacity of major manufacturers such as BOE and Visionox climbs, domestic demand for OLED materials is also expected to grow rapidly. The subsidiary Qiangli Yulai achieved mass production of OLED sublimation materials in September 2017, and has now entered the R&D and production lines of major domestic OLED panel manufacturers. On the other hand, the company is currently constructing “next-generation flat panel display and integrated circuit materials with an annual output of 3,070 tons” and “new fiber composites, key materials for OLED flat panel display technology” projects. After completion, the company is expected to further expand the scale of the company's OLED business. The extension of the industrial chain continues to promote the company's capital increase acquisition of 34.5% of Xinyu's shares in Changsha at the end of 2018. The target company is the largest manufacturer of photosensitive initiator series products in China. The products include more than 20 varieties, including 1173, 184, 369, 907, TPO, PBZ, and ITX, which have a synergistic effect with the company's main business. Previously, in October 2018, the company also completed the acquisition of 10% of Green's shares and entered the field of UV-LED inks. This product has significant environmental advantages, mainly replaces traditional gravure inks, and has broad development space. Maintaining the “increase in holdings” rating We maintain the company's net profit forecast for 2019-2021 at 188/2.24/262 million yuan respectively. According to the latest share capital of 515 million shares, the corresponding EPS is 0.37/0.44/0.51 yuan, respectively. Combined with the valuation level of comparable companies (36 times PE in 2019), considering the company's OLED business development prospects and active expansion of the industry chain, we gave the company 38-40 times PE in 2019, corresponding to the target price of 14.06-14.80 yuan. Maintaining the “increase in holdings” rating 。 Risk warning: risk of core technology being lost, new business development falling short of expectations, and risk of fluctuations in downstream demand.