Investment highlights: First coverage, giving an increase in holdings rating. The company's leading position in tobacco essence is stable. Future efforts to expand business such as food flavors and food ingredients are expected to contribute to new growth points. At the same time, with the pilot heating and non-combustion industry standards, the increase in the amount of tobacco essence consumption is expected to drive the company's performance growth. It is estimated that the EPS for 2019-2021 will be 1.98, 2.09, and 2.20 yuan respectively, with a target price of 40 yuan. Tobacco essence faucet, multi-category layout. The company's products cover two categories: flavors and food ingredients. According to downstream uses, the flavor field can be divided into three categories: food, tobacco, and daily essences. Among them, the tobacco flavor field includes well-known brands such as “Tianhong”, “Xideng”, and “Huafang”, which are the main sources of the company's revenue, accounting for 84.55% of revenue in 2017. The gross profit margin of tobacco flavors is 86.23%, which is higher than that of other products. Thanks to the relatively high revenue share of tobacco flavors, the company's gross margin level is significantly higher than that of its peers. The company's top five customers are tobacco companies, accounting for about 60%. Fragrances are developing steadily, and there is plenty of room for concentration improvement. In 2017, China's essence production is expected to reach 750,000 tons, and the sales revenue of enterprises above the flavor and fragrance industry is 66.02 billion yuan. It is expected to maintain steady growth in the future. The concentration of the essence industry in the international market is high, with CR10 reaching 77%, and the concentration of China's essence industry is low. The top three companies in the industry are Huabao Co., Ltd., China Flavors and Fragrances, and Aipu Shares, all with a market share of less than 3%. The concentration of leading benefits is expected to increase. Multi-dimensional efforts are being made to lay out new business growth points. 1) The company's tobacco essence development advantages are relatively obvious. Continued expansion of new businesses such as food flavors and food ingredients is expected to contribute to new growth points in the future. 2) Heated, No-Burn (HNB) The new tobacco market is gradually being standardized, and the increase in the consumption of tobacco flavors is expected to drive rapid growth in the company's performance. Risk factors: fluctuations in the supply of raw materials, stricter regulatory policies in downstream industries, etc.