The spandex industry is expected to gradually improve, and the company's new production capacity is highly competitive. At the end of 2018, the effective production capacity of spandex in China was 757,000 tons/year, and the capacity utilization rate increased to 82.4%. The production capacity of the domestic spandex industry in 2019 increased by 13.2% compared to the end of 2018. There will be less new production capacity in the next few years, and the industry pattern is expected to improve. Leading enterprises have expanded significantly, and industry concentration has increased. As leading companies such as Huafeng Spandex and Xinxiang Chemical Fiber continue to expand production, the current production capacity of the top five domestic spandex companies has reached 63.2%, an increase of 17 pct compared to the end of 2013. The control of leading enterprises over the market has increased markedly. There was little new production capacity in the industry from 2020 to 2021. Currently, there are 9 small domestic enterprises with spandex production capacity below 20,000 tons/year. They basically do not have a competitive advantage under stricter environmental protection, or may gradually be eliminated in future market competition. The pattern of the spandex industry is expected to improve further. The company currently has a spandex production capacity of 120,000 tons/year, of which 2X20,000 tons of ultra-soft spandex fiber built by the company in the new plant area from 2015 to 2019, and the new 3X20,000 tons/year ultra-fine denier spandex fiber project has been put into operation one after another. The new production capacity process technology is advanced, and the product differentiation ratio is high. The viscose filament industry is in an oligopolistic pattern, and profitability has increased markedly. Currently, there are only 5 domestic viscose filament production enterprises. Among them, the top three enterprises have a total production capacity of 188,000 tons/year, accounting for about 88.7% of the total domestic production capacity. The state strictly prohibits the construction of new viscose filament projects, but leading enterprises represented by the company are allowed to expand production; benefiting from falling raw material prices, the price spread of viscose filament has widened, and profitability has increased markedly. In the next few years, only Xinxiang Chemical Fiber and Jilin Chemical Fiber will expand production. It is expected that the top three domestic enterprises will account for 90% of the viscose filament production capacity in 2020. Industry concentration will further increase, and the viscose filament market under the oligopoly pattern may be expected to usher in an upward boom cycle. The price of viscose filament has been generally stable in recent years. Since the third quarter of 2018, due to the continuous decline in the prices of raw materials such as paddle meal and caustic soda, the price difference of viscose filament has increased by 2,780 yuan/ton. In 2018, the company's 10,000 tons/year new viscose filament project was put into operation, and in 2020, the first phase of the company's biomass cellulose project is expected to be put into operation with a production capacity of 10,000 tons/year, and the leading position in the industry is stable. Gradually eliminate the viscose staple fiber business to reduce the drag on overall performance. The competitiveness of the company's viscose staple fiber business is low. In recent years, profits have been poor due to increased environmental enforcement and market competition. The company has drastically reduced the viscose staple fiber business and decided to finally exit, which will greatly reduce its impact on the company's overall performance. Profit forecast and investment suggestions: The company is a leading spandex and viscose filament enterprise in China. New production capacity continues to increase, and market position continues to rise. We expect the company's EPS from 2019 to 2021 to be 0.11 yuan, 0.19 yuan and 0.33 yuan respectively. The current stock price corresponding to PE is 31.8 times, 18.4 times and 10.9 times, respectively, giving the company a target price of 4.4 to 5.1 yuan for six months. First coverage, giving a “buy” rating. Risk warning: falling product prices, rising raw material costs, new projects falling short of expectations