The company released its annual report in 2019 and its performance increased steadily. According to the 2019 annual report, the company achieved revenue of 1.981 billion yuan in 2019, an increase of 9.27% over the same period last year, a net profit of 227 million yuan, an increase of 19.88%, and a non-return net profit of 211 million yuan, an increase of 28.07% over the same period last year. According to the annual report, the company has more than 50 pigment production lines and more than 20 intermediate production lines. High-performance organic pigments and some intermediates are in the leading position in the domestic market share.

Organic pigment business revenue growth, gross profit margin increased, operating cash flow significantly improved. In 2019, the company's pigment business achieved revenue of 1.89 billion yuan, an increase of 10.51% over the same period last year, with a gross profit margin of 26.12%, an increase of 2.67 pct over the same period last year; intermediate business achieved revenue of 74.33 million yuan, down 10.74% from the same period last year, with a gross profit margin of 27.62%, increasing 10.77pct over the same period last year. In terms of sales volume, the company sold 33700 tons of pigment products in 2019, an increase of 1.95% over the same period last year, and sold 2048 tons of intermediate products, an increase of 0.15% over the same period last year. In terms of cash flow, the company's net operating cash flow in 2019 was 184 million yuan, an increase of 73.68% over the same period last year.

Projects under construction are progressing one after another. According to the annual report, in 2019, the company has a production capacity of 37300 tons of organic pigments, with a capacity utilization rate of 89%. Part of the process of the 3000-ton high-performance organic pigment project has been adjusted and optimized and is expected to be put into production in June 2020. Xuancheng Yinte pigment Co., Ltd. annual production of 5000 tons of organic pigment products optimization and upgrading project completed.

Profit forecast and investment advice. We expect the company's earnings per share for 20-22 years to be 1.33,1.63,1.96 yuan respectively, with a price-to-earnings ratio of 24 times, 19 times and 16 times respectively. According to our forecast, the company's earnings per share will grow at a compound growth rate of 25% in 20-22 years. Taking into account the growth rate of the company's performance and the level of comparable company valuation, we will give a PE valuation of 25 times the company's earnings per share in 2020, corresponding to a reasonable value of 33.14 yuan per share. Maintain the "overweight" rating.

Risk hint. The price of organic pigment products fell, the price of raw materials fluctuated sharply; downstream demand remained depressed; the progress of projects under construction was lower than expected; major safety and environmental accidents.