Key investment points The performance of leading pressure and temperature measurement instrument companies has continued to grow steadily; the company's main products are digital pressure testing and temperature calibration instruments, which are widely used in national economy and livelihood industries such as petroleum, electricity, machinery manufacturing, and national defense industries. The company's net profit has maintained positive growth for 12 consecutive years. The ten-year CAGR of the company's operating income and net profit from 2009 to 2018 was 15.9% and 15.4%, respectively. The company focuses on the field of high-end pressure and temperature instruments, and continues to launch high-value-added products with leading global levels. Since its listing, the company's gross margin has remained above 70%, and its net profit margin has remained above 25%. High-intensity R&D builds core competitiveness and guarantees the endogenous growth of the company's performance: In 2019, the company's R&D investment reached 54.12 million yuan, accounting for 18.9% of revenue. The share of R&D investment in revenue is far higher than that of international leaders such as Fortive (Fluke's parent company) and Yokogawa. We believe that there is a causal relationship between the company's high R&D investment and steady performance growth. The company needs to continuously launch new products with more technical content through research and development to enrich the product lineage and expand downstream application fields, thereby increasing its market share in the field of pressure and temperature detection instruments and achieving sustainable growth in endogenous performance. Therefore, R&D capacity and high R&D investment are the foundation of the company's core competitiveness. The fixed increase broke through the bottleneck in production capacity and laid out MEMS to create long-term growth space; the company plans to raise no more than 349 million yuan in non-public shares, of which 279 million yuan will be used for the expansion of production of pressure and temperature detection instruments. The project is fully completed after delivery. It is estimated that the average annual sales revenue and net profit will be 482 million yuan and 100 million yuan respectively. After expanding production capacity, the production capacity will reach 2.75 times the current level, which will help the company gain greater market share. In addition to the production expansion project, the company plans to invest 210 million yuan to build 3 MEMS pressure sensor production lines. It is expected to achieve post-production sales revenue of about 819 million yuan and net profit of 205 million yuan. The company's sensor project will use the resonant principle to fill the gap in domestic high-precision pressure sensors. We believe that the company's sensor products will gradually mature after the completion of the second phase of the project (2023), opening up new space for long-term growth for the company. Profit forecast and investment advice: We estimate that the company's operating income for 2019, 2020 and 2021 will be 286, 319, and 448 million yuan respectively, and net profit of 7841, 8680, and 122.84 million yuan respectively, and corresponding PE of 31.1, 28.1, and 19.8 times, respectively. For the first time, coverage was given an “increase in holdings” rating. Risk factors: Production expansion projects are not progressing as expected, MEMS projects are not progressing as expected, production capacity cannot be absorbed as expected, downstream demand falls short of expectations, etc.