Through major asset restructuring, the overall listing of the group, Thorpe Group has a production capacity of 1.2 million tons of acetic acid (another 200,000 tons are temporarily discontinued), while supporting 300,000 tons of ethyl acetate production capacity, forming a “complete coal chemical industry chain”. Acetic acid ranks first in the country, has outstanding scale advantages, and international competitiveness. The original main business of Jiangsu Sopp Corporation was the production of ADC foaming agents. Profitability has not been optimistic in recent years. The company actively promoted the overall listing of the group. On November 4, 2019, the company's major asset restructuring passed the review by the Securities Regulatory Commission and was conditionally approved. Acetic acid industry: Demand has increased, production capacity has not increased, and the industry has entered a boom cycle on the supply side: the period of rapid growth in production capacity has passed, and there will be little new production capacity in the future. The acetic acid industry has high entry barriers, and new production capacity will be limited in the future. 1) Capital expenditure barriers: The investment in acetic acid production equipment is large, and the construction cycle is long. The investment required for 500,000 tons of production capacity is about 3 billion dollars, and a construction cycle of 2-3 years is required to completely build a new production capacity. 2) Technical barriers: Acetic acid is corrosive, and equipment requires frequent maintenance. Accumulation of operating experience over a long period of time will help manufacturers carry out stable and low-cost production. Currently, there is not much new production capacity planned for the future, and there will be no large-scale new production capacity within 1-2 years. Demand side: Downstream demand continues to be strong, providing strong support for the price of acetic acid. 1) PTA's new production capacity investment will directly drive the increase in demand for acetic acid in the short term. It is expected that the PTA units launched in the next two years will drive demand for about 900,000 tons of acetic acid. 2) Dependence on the removal of imports of EVA resin is imperative. New production capacity continues to be invested, driving the growth in demand for ethylene acetate in the downstream acetic acid industry. It is planned to add about 1.9 million tons of EVA production capacity within the next 5 years, corresponding to the demand for acetic acid of about 250,000 tons. 3) Ethyl acetate added about 150,000 tons of production capacity, which could theoretically drive demand for acetic acid by about 90,000 tons. 4) Looking at the long term, the country has introduced an ethanol fuel promotion plan. Apart from the current domestic fuel ethanol production capacity of more than 2 million tons and the additional production capacity of more than 2 million tons under construction, it is conservatively estimated that there is still a supply gap of 6 million tons. There are potential opportunities in the acetic acid to ethanol industry, which will also provide some support for the price of acetic acid. Investment proposal: After this major asset restructuring is successfully completed, Jiangsu Thorpe will have the largest production capacity of 1.2 million tons of acetic acid in China, accounting for 14% of the country's total production capacity; covering a complete industrial chain from methanol manufacturing to acetic acid production, with obvious scale advantages, the lowest cost curve in the industry, and core competitiveness. At the same time, Thorpe has an excellent geographical location, is close to major consumption areas for acetic acid, and has complete industrial park facilities. Future development is limitless. In this transaction plan, the company's profit forecast is based on the price of acetic acid of 2,600 yuan. We believe that the actual price center of acetic acid this year will be far higher than 2,600 yuan. If this major asset restructuring is successfully completed, the company is expected to achieve net profit of 653 million yuan and 771 million yuan respectively in 2019 and 2020, corresponding to EPS of 0.62 yuan and 0.74 yuan, corresponding to PE 12 times and 12 times; it will be given an “increase in holdings” rating.