The incident company released its report for the first quarter of 2020. During the reporting period, the company achieved operating income of 253 million yuan, a year-on-year decrease of 15.1%; realized net profit attributable to shareholders of listed companies of 43.43 million yuan, a year-on-year decrease of 13.6%; realized net profit attributable to shareholders of listed companies after deducting non-recurring profits and losses of 42.93 million yuan, a year-on-year decrease of 3.41%; realized net cash flow from operating activities of 81.6 million yuan, a year-on-year decrease of 12.7%; achieved basic earnings per share of 0.07 yuan, a year-on-year decrease of 12.5%; achieved ROE 2.20%, down 0.28 percentage points from the previous year. Brief review Affected by the pandemic, the company's performance in the first quarter declined only slightly. The company achieved operating income of 253 million yuan in the first quarter of 2020, a year-on-year decrease of 15.1%; realized net profit of 43.43 million yuan, a year-on-year decrease of 13.6%; and realized net profit of 42.93 million yuan after deducting non-return to the mother, a year-on-year decrease of only 3.41%. Since the end of January 2020, the COVID-19 epidemic in China began to break out, and various restrictions have been adopted across the country to stop the spread of the epidemic. Affected by the epidemic, the shutdown period for national infrastructure projects in Q1 2020 was longer than in previous years. In Q1 2020, the national automobile sales volume was 3.67 million units, a sharp drop of 42.4% over the previous year. Faced with such adverse effects, the company's performance was not greatly impacted. There was only a slight decline, indicating that the company's high-margin core products, such as microprism-type reflective films, license plate films, and semi-finished products, have remained stable, and their market share is still rising. During the reporting period, the company's sales expenses were 16.58 million yuan, up 17.3% year on year; management expenses were 17.06 million yuan, down 9.5% year on year; R&D expenses were 9.08 million yuan, down 14.3% year on year; and financial expenses were -1.14 million yuan, down 124.3% year on year, mainly due to some discounted interest adjustments. There are different stages of the epidemic at home and abroad. The domestic market for reflective materials is increasing, and domestic substitution is accelerating. At present, the domestic epidemic has stabilized, and downstream demand for reflective materials is recovering well. In order to stimulate domestic economic growth, domestic infrastructure construction has entered the “fast track”. Due to its excellent performance, microprismatic reflective film will be used more in expressways, national highways, and urban road traffic signs, and the incremental market demand for microprism-type reflective film, which is one of the company's core businesses, will expand accordingly. Currently, the domestic market size of microprism-type reflective materials is about 3 billion yuan, and the company's market share is about 10%. Nearly 90% of the market is still monopolized by foreign companies such as 3M, but the current overseas epidemic is still fermenting, blocking the global industrial chain supply of high-end reflective materials and other related products. This will accelerate the domestic replacement of such materials. With subsequent technological innovation and localization of upstream core raw materials, the market share will gradually increase with the advantages of the company's own integrated business model. In terms of license plate film business, in order to stimulate the automobile market and promote the growth of new energy vehicles, the State Council has established relevant policies. It is expected that domestic automobile production and sales will bottom out and rise, and the penetration rate of new energy vehicles will also increase further. New energy vehicle license plates use hot stamping technology, and the profitability of this type of license plate is more than double that of traditional license plates. The company already accounts for 30% of the domestic market share of license plate films and semi-finished products. With the implementation of favorable policies and market expansion, the company's license plate film business revenue and profitability will increase steadily. New business prospects such as aluminum-plastic film and 5G mobile phone backboards are promising and ready to go. In terms of aluminum-plastic film business, the company mainly focuses on digital customers, and added some energy storage customers in 2019. In 2020, the company will maintain power customer relationships, increase the development of energy storage customers, and optimize the customer structure for digital customers and expand to middle and high-end customers. Due to the epidemic, the production capacity of Japanese and South Korean aluminum-plastic film manufacturers such as DNP is insufficient, and domestic lithium battery manufacturers are also constantly seeking cooperation from domestic aluminum-plastic film manufacturers, which will also accelerate the domestic replacement of the aluminum-plastic film business. In 2019, the company added 4 PC/PMMA composite board production lines produced in Germany, mainly for 5G mobile phone backplanes and automotive interiors to expand the market. It is expected that sales will be partially achieved in the second half of 2020, and the company's performance will also improve significantly after production is put into operation. In 2020, the sales price of the subsidiary Warwick quantum dot film will return to the market price level. By introducing new barrier film suppliers while guaranteeing product quality while reducing product production costs, the profitability of quantum dot film products will be increased. Excluding the impact of the pandemic, Warwick's performance in 2020 will improve markedly compared to 2019 due to the advantages of its own brightening film business, the increase in composite film production capacity, and the expansion of quantum dot film in other downstream companies. Profit forecast and valuation: The company's net profit for 2020, 2021, and 2022 is expected to be 2.66, 3.79, and 469 million yuan respectively, corresponding to EPS of 0.43, 0.61, and 0.75 yuan, and corresponding PE of 19.9X, 14.0X, and 11.3X respectively, maintaining the “buy” rating. Risk warning: The development of the epidemic is uncontrollable, project commissioning falls short of expectations, and downstream demand falls short of expectations.