Event: The company released a performance report. In 2019, it achieved operating income of 2,733 billion yuan (+100.57% year-on-year) and net profit of 168 million yuan (+36.96% year-on-year), in line with the growth range of previous performance forecasts. The main reason for the increase in performance is that Haier New Materials, which was acquired in November 2018, achieved a merger. At the same time, the company strengthened internal cost control, increased sales revenue, and the parent company's performance also increased. The modified plastics industry has ushered in an inflection point. The company is actively expanding production capacity. We believe that the modified plastics industry is entering an inflection point in the economy, and the profitability of related enterprises will improve markedly. Production in the upstream raw materials sector has clearly expanded, and the supply of polyolefins is sufficient at this stage. Demand growth in downstream home appliances, automobiles, building materials, packaging and other fields is expected to improve under policy stimulus. Under the trend of gradual increase in industry concentration, the overall profitability of the modified plastics industry will continue to improve. The company currently has a production capacity of 200,000 tons of modified plastics (including 120,000 tons of Haier New Materials), and plans to issue convertible bonds to raise capital to build 120,000 tons of modified plastics production capacity. The company currently has high market demand for polypropylene meltblown material products, which has an obvious driving effect on the company's modified plastic sales volume. The elastomer business is developing rapidly. The elastomer products of companies entering many high-end fields mainly include products such as TPV, TPIIR, HNBR, and DVA. Among them, TPV is a new type of rubber that has great application potential in replacing traditional vulcanized rubber, and has now been widely used in the domestic auto parts industry chain. The company is actively expanding the use of TPV elastomers in the fields of cooling water pipes for new energy vehicles, rail transit, construction engineering, etc., and will make full use of production capacity after the new installation is completed. Special rubbers such as TPIIR, HNBR, and DVA are new products that have continued to break through in the company's technological processes in recent years. They have gradually entered downstream medical and automotive tire application markets, and are expected to enter a rapid release stage in the next 2 years. Risk warning: The epidemic has delayed the resumption of work downstream and affected demand; raw material prices have fluctuated greatly. Investment advice: raise the profit forecast and give it an “increase in holdings” rating. We expect the company's net profit to return 168/3.03/392 million yuan to the parent company in 19-21, with an annual growth rate of 37%/81%/29%, respectively. Earnings per share in 19-21 were 0.41/0.75/0.96 yuan, respectively, and the corresponding PE was 72.1/39.9/30.9 times. The company's stock price has fluctuated greatly recently. We are optimistic about the company's long-term development in the two major businesses of modified plastics and elastomers, and gave it an “increase in holdings” rating.