Recommendation logic: The ADC foaming agent business that the company was originally engaged in has average profitability. The proposed issuance of shares to acquire the group's 1.2 million tons of acetic acid and other assets will become a leading domestic acetic acid enterprise, with cost advantages leading the industry. At the same time, the balance between supply and demand in the acetic acid industry is tight. As foreign installations age, the company's performance is extremely flexible if the price of acetic acid increases. At the second meeting, the resolution of the restructuring was not changed: in May 2019, the price of acetic acid fell sharply to the bottom of the year, causing the company's restructuring plan to be rejected. The company's readjustment of the value of assets such as acetic acid was lowered from 4.8 billion to 4 billion dollars. The adjusted plan was accepted by the Securities Regulatory Commission on October 10. Coal consumption is strictly controlled, and the new production capacity of acetic acid is limited: Acetic acid production capacity expanded rapidly from 2010 to 2013, and the capacity utilization rate hovered around 60-70%. As the industry pattern stabilized, coal consumption control and downstream demand increased, the industry operating rate increased to 80% in 2018. Currently, the nominal production capacity of acetic acid in China is 925 million tons, the industry's CR4 is 47%, and the production capacity will be increased by 100,000 tons in the next 2 years. The supply-side competition pattern is good. Downstream PTA expands production on a large scale to ensure increased demand for acetic acid: downstream acetic acid includes PTA, ethylene acetate, ethyl acetate, etc., of which PTA accounts for 25%. The future industry plans to add 3,000 tons of production capacity. One ton of PTA consumes 0.04 tons of acetic acid alone, corresponding to the theoretical demand of 1.2 million tons of acetic acid. Other traditional demand mainly corresponds to solvents, coatings, etc., and is expected to maintain a 5% growth rate. Export demand is gradually returning to normal, and there are hidden risks of aging of foreign installations: In 2018, domestic acetic acid exports increased to 700,000 tons, and the price exceeded 5,000 yuan. In 2019, as the normal export price of acetic acid fell back to 2,500 yuan/ton, in the second half of the year, the price rebounded to 3,500 yuan/ton due to the failure of the Yima installation, increased domestic maintenance and downstream demand, and the recovery in downstream demand. In the future, it is not ruled out that domestic exports will increase again due to foreign equipment problems. It is one of the leading domestic acetic acid companies, with huge performance elasticity: after the restructuring is completed, the company will have an acetic acid production capacity of 1.2 million tons and become the leading domestic acetic acid leader. Costs are leading the industry, and there is still room for decline. According to estimates of production and sales of 1.2 million tons, if the price of acetic acid increases by 500 yuan/ton, profits can increase by 450 million yuan, and performance elasticity is huge. Profit forecast and investment advice: If the restructuring is completed before the end of 2019, we expect the company's net profit in 2019-2021 to be 614 million, 764 million, and 976 million yuan respectively. Regardless of asset restructuring, the net profit for 2019-2021 will be -0.13, -0.10, and -11 million yuan, respectively. Given that the company is the leader in acetic acid in China, it has a cost lead in the industry, enjoys excess profits, and there is still room for decline in the future through technological reform. At the same time, the company is the purest acetate target for A-shares. Its performance is extremely flexible, and for the first time, it has been given an “increase in holdings” rating. Risk warning: asset restructuring progress or failure to meet expectations; risk of a sharp fall in the price of acetic acid; risk of force majeure for the device.