The company announced the “M&A Group Tianneng Chemical's 450,000 tons of PVC and related integrated assets” plan to accelerate national reform and optimize the industrial structure. We are optimistic about the long-term development of the company as a high-quality local country to change standards, and actively recommend it. The company will load the Group's 450,000 tons of high-quality PVC production capacity. The company announced that it will purchase 100% of its total shares in Tianneng Chemical from Tianye Group and Jinfu Investment through the issuance of shares, convertible bonds and cash payments. Tianneng Chemical's 100% equity valuation value is 4.839 billion yuan (that is, the overall value and current transaction price). The cumulative deduction performance commitment for the next three years is 1,572 billion yuan for 2019-2021 or 1,590 billion yuan for 2020-2022 (depending on the timing of the restructuring), and the corresponding valuation multiplier is 9 times. Actual performance may be better. Tianneng's actual net profit for 2017/2018 was 842/887 million yuan; prices of PVC and caustic soda are under pressure. Under such circumstances, net profit returned to mother from January to May 2019 was still 265 million yuan. Once prices recover, Tianneng's performance is also expected to increase significantly. Equities and bonds are issued simultaneously, and the share capital is expected to increase by 965 million shares. The current payment for Tianneng Chemical is proposed to use the method of issuing shares, bonds, and cash, including: 1. Issuance of 387 million shares (price: 594 yuan/share, locked for 3 years); 2. Issuance of 3 million bonds (initial conversion price of 5.94 yuan, corresponding to 51 million shares); raising 2.2 billion yuan, assuming 90% of yesterday's closing price (i.e. 4.17 yuan/share), corresponding to 528 million shares. The company's current share capital is 973 million shares, and the estimated share capital after issuance is 1,938 million yuan (assuming all bonds are converted to shares), corresponding to the closing price of 463 yuan/share market value of 9 billion yuan on October 8. According to the strategy, the company divests non-main business assets and continuously optimizes the industrial structure. Previously, the company continued to push forward reforms in accordance with the strategy: 1) passed the 62.967% share transfer plan of Shihezi Tianye Tomato Products Co., Ltd. in December 2018; 2) In February 2019, the company publicly pre-listed and transferred 100% of the shares of Beijing Tianye Oasis Technology Development Co., Ltd. and 100% of the shares of Jinghe Xinshi Transportation Co., Ltd. The above three companies have completed the audit and evaluation work and plan to be officially listed. The company plans to speed up the process of divesting non-main assets and loss-making assets, enhance its ability and competitiveness to deal with market risks in accordance with the reform requirements of state-owned state-owned enterprises, fight an aggressive reform battle, and focus on developing the main industries of chemicals and new materials. The ethylene glycol project is progressing rapidly, and performance is expected to increase significantly after delivery. The company and the group established a joint venture with Tianye to undertake the Group's one million ton ethylene glycol phase I 600,000 ton project. Currently, the core reactor production capacity, single production line scale, and product quality used in the project are at the leading level at home and abroad. The competitive advantages of large-scale, intensive and large-scale installations will be fully reflected. After completion, it is expected to achieve annual sales revenue of 4.2 billion yuan and annual profit of 8.4 billion yuan, greatly increasing performance. Risk factors: Market demand and product price risk; project progress falls short of expectations; uncertainty about restructuring. Investment advice: The company accelerates national reform and optimizes the industrial structure. Optimistic about the company's long-term development, maintain the company's 2019/20/21 EPS forecast of 0.54/0.68/0.84 yuan/share, give a target price of 11 yuan (corresponding 20 times that of 2019), and maintain a “buy” rating.