The 2019 performance declined markedly year over year, but net operating cash flow improved significantly. The company recently released its 2019 annual report and 2020 quarterly report. 2019 operating income was about 2,986 billion yuan, -15.73% year-on-year, net profit of about 24 million yuan, -89.09%; net operating cash flow was about 1.04 billion yuan, +75.57% year-on-year. In addition, the company plans to distribute cash dividends of about 46 million yuan (tax included), with a cash dividend rate of 196%. The company's 2020 Q1 revenue was about 456 million yuan, -40.61% year-on-year, and net profit was about 8.38 million yuan, reversing losses year-on-year. Overall, the company's 2019 performance was slightly higher than the previous performance report. Considering the impact of the epidemic on 2020Q1, the company's performance was basically in line with expectations. Against the backdrop of the weakness of the NEV industry and the sharp drop in cobalt prices, the company achieved invaluable operating results in 2019. In 2019, domestic NEV production was 1,242 million units, down 2.3% year on year. The average price of cobalt in the Yangtze River was about 278,600 yuan/ton, down 48% year on year. Affected by the weakness of the industry, the gross profit of the company's cobalt salt business fell by about 53% in 2019, and the gross profit of the precursor business fell by about 56%, taking into account falling inventory prices and losses of about 208 million yuan. However, the company still achieved invaluable operating results. First, the net inflow of operating cash flow of 1.04 billion yuan, a sharp increase of 75.57% over the previous year, mainly strengthened control over the size of inventories and accounts receivable, and the cash turnover cycle became shorter; second, the company adjusted its business and sales strategy to appropriately shrink upstream cobalt raw materials business and increase copper sales. At the same time, high-nickel ternary precursors have also achieved mass sales, and the gross profit share is expected to gradually expand; third, the key projects are progressing smoothly, and the 10,000 ton precursor project has now been successfully put into production, and now has a production capacity of 22,000 tons; Qingdao Xinhao Pulp now has a production capacity of 22,000 tons; The new workshop was successfully put into operation and production It can be greatly improved; fourth, cost control has been effective. In 2019, sales expenses, management expenses, and financial expenses all declined year-on-year. The bottom of the industry is determined to increase the NEV materials business, laying the foundation for performance to enter a period of rapid growth. At the end of February this year, the company announced a fixed increase plan. It plans to raise no more than 1.72 billion yuan, increase precursors, conductive agents, cobalt intermediates, and cathode copper projects, and strive to achieve production capacity of 100,000 tons of ternary precursors and 20,000 tons of metal tons of cobalt salt over the next three years. The company is steadily expanding at the bottom of the industry, and performance is expected to enter a period of rapid growth. First, due to supply contractions such as Mutanda's discontinuation of production, cobalt supply and demand are clearly tightening, and cobalt prices can be expected to pick up in the future. Second, the domestic NEV care policy is still in place, and the growth trend in overseas markets is strong. Once the epidemic eases, the NEV industry chain is expected to recover rapidly. Third, the global development of new energy vehicles is accelerating, and competition for integrated supply is intensifying. The company is a well-deserved leading supplier in the cobalt (raw material - cobalt salt - precursor) and new conductive agents (graphene, carbon nanotube conductive agents) industries. At the same time, it has implemented a forward-looking layout in the field of hydrogen fuel film electrode components (MEA). The company has strong industrial synergy and competitive advantages in the field of key materials for new energy vehicles. Investment advice: Maintain a “buy-A” investment rating. Based on the assumption that the average price of cobalt in 2020-2022 is 260,000 yuan, 300,000 yuan, and 350,000 yuan/ton, we expect the company's net profit from 2020 to 2022 to be 140 million yuan, 291 million yuan, and 535 million yuan, respectively. Considering the company's integration of leading assets and steady expansion at the bottom of the NEV industry chain, with strong growth potential, the target price for 6 months is 15.75 yuan, which is equivalent to a dynamic price-earnings ratio of 25x in 2021. Risk warning: 1) The impact of the epidemic on company orders exceeded expectations; 2) the contraction in the supply of cobalt raw materials fell short of expectations; 3) global smartphone production fell short of expectations; and 4) global NEV production fell short of expectations.