The company released its 2019 annual report, achieving operating income of 4.748 billion yuan, a year-on-year decrease of 2.53%, and net profit of 141 million yuan, a year-on-year decrease of 22.52%. According to the report for the first quarter of 2020, the company achieved sales revenue of 919 million yuan, a year-on-year decrease of 21.46%, and net profit of 64 million yuan, a year-on-year increase of 47.49%, corresponding to basic earnings per share of about 0.06 yuan/share. Comment: Revenue and profit have both declined, and the supply of corrosive foil has dragged down the company's performance. In 2019, revenue decreased by 2.53% year on year, net profit of the company decreased by 22.52% year on year. Affected by insufficient supply of corrosive foils throughout the year, the company's production of chemical foil products decreased by 14.01% year on year; in terms of sales revenue of major products, electronic aluminum foil sales revenue was basically stable; due to insufficient supply of corrosive foil, electrode foil sales revenue decreased by 20.35% year on year; driven by growing demand in the downstream aerospace sector, the company's high-purity aluminum sales revenue increased 7.72% year on year; due to large fluctuations in aluminum prices, the company's sales revenue for alloy products and aluminum products decreased year on year 7.62%; Through deepening cost and quality control, during the reporting period, the gross margin of the company's new electronic materials increased by 1.72 percentage points over the previous year. Among them, the gross margin of high-purity aluminum aluminum increased by 0.90 percentage points over the previous year, the gross margin of electronic aluminum foil increased by 2.46 percentage points over the previous year, and the gross margin of electrode foil increased by 2.40 percentage points over the previous year. Benefiting from the increase in net profit of the invested units and the increase in hedging profit, the company's net profit for the first quarter increased by 47.49% year-on-year. There is huge room for import substitution of high-purity metals. The company is the only domestic enterprise with the production capacity of 5N (99.999%) and above purified ultra-high purity aluminum and high-purity smelting and casting by joint law. All of them are currently under the control and adoption of the Xinjiang Zhonghe. After ten years of research and development (National Major Science and Technology Project 02), the company's ultra-high purity aluminum sputtering target substrates and aluminum-based bonding wire busbars began to be supplied to the market one after another in 2018. The products gradually stabilized and were supplied in batches in 2019. Currently, the target materials for semiconductors account for about 60% of the target materials supplied by the company, and the target materials for display panels account for about 40%. The main customers are Youyan Yijin New Materials Co., Ltd., etc. Profit forecast and investment recommendations: The company's net profit for 2020-2022 is estimated to be 1.22, 1.32, and 174 million yuan respectively; EPS is 0.12, 0.13, and 0.17 yuan respectively. The P/E corresponding to the stock price on April 27, 2020 is 37X, 34X, and 26X, giving it an “increase in holdings” rating. Risk warning: Prices of alumina and electrolytic aluminum fluctuate sharply, and domestic substitution falls short of expectations