Incident: The company plans to issue convertible corporate bonds to raise a total capital of no more than 340 million yuan for a PBAT project with an annual output of 60,000 tons of biodegradable polymer materials and supplementary liquidity. Main opinion: 1. Leading PVC additives enterprise, production capacity under construction has entered the harvest period one after another. The company was founded in 2001 and is deeply involved in the PVC additives industry, mainly engaged in R&D, production and sales of ACR processing additives, ACR impact modifiers, and MBS impact modifiers. PVC additive products are mainly used in plastic processing and modification, giving products excellent chemical and physical properties such as processability, impact resistance and weather resistance. The company's ACR processing additives and impact-resistant modifiers are mainly used in WPC floors, SPC floors, PVC wall panels, kitchen and bathroom board products, furniture product materials, etc., as well as PVC pipes, profiles, boards, wood-plastic products, etc.; the company's MBS impact modifier products are mainly used in transparent and opaque sheet products, PVC pipe profile products, pharmaceutical and consumer packaging materials, and other functional film fields of decorative materials such as WPC and SPC floor and wall panels. At present, the company has a comprehensive annual production capacity of 120,000 tons, ranking among the highest in the industry. Among them, ACR products have a production capacity of 70,000 tons, MBS products with a production capacity of 30,000 tons, and MC products with a production capacity of 20,000 tons (H2 will contribute to the increase in 2020), with MBS production capacity ranking first in China. At the same time, the first phase of the company's MBS impact modifier project with an annual output of 40,000 tons (annual output of 20,000 tons) is expected to be put into operation in Q3 2020, and construction of the second phase of 20,000 tons will begin at the end of the year. After completion, the company's total MBS production capacity is 70,000 tons/year, ranking first in the world. The company's Linyi Ruifeng MC impact modifier project phase II project with an annual output of 40,000 tons (annual output of 20,000 tons) and the 20,000 tons of epichlorohydrin project have been affected by the epidemic and process plan adjustments. The completion and commissioning time has been delayed. If it goes well, it is expected that production will be put into operation within 2020. In 2019, the company's additive product production was 8,3937 tons, +3.39% year on year; sales volume was 8,4729 tons, -0.85% year on year. The company has nearly 3,000 domestic customers, and its products are exported to more than 60 countries and regions, including Europe, America, South Asia, Southeast Asia, and East Asia. In 2019, the company achieved operating income of 1,213 billion yuan, -16.06% year-on-year; net profit of 74.53 million yuan, -17.37% year-on-year. In the first quarter of 2020, the company achieved operating income of 204 million yuan, or -36.11%, and net profit of 11.11 million yuan, -48.34% year-on-year, mainly affected by the epidemic, and is expected to gradually return to normal in the second quarter. In 2019, China's apparent consumption of PVC was 19616,600 tons, +3.34% year-on-year; affected by the epidemic, in January-April 2020, apparent PVC consumption was 6.512,300 tons, a year-on-year decrease of 0.96%. Mainly, there were many declines in February and March, and positive growth resumed in April. As new production capacity is launched one after another, the company will enter a harvest period. 2. The layout of the degradable plastics industry is expected to reinvent Ruifeng. On June 14, 2020, we released a topic on the biodegradable plastics industry. We are optimistic about the huge development space of degradable plastics. According to statistics, China consumes about 4 million tons of shopping bags, 2.46 million tons of agricultural film, and 2.6 million tons of takeout packaging every year, and demand for plastics continues to grow with the rapid development of express delivery and takeout businesses. For these fields, biodegradable plastics are particularly suitable. Assuming 10% replacement, it would add more than 900,000 tons of demand for degradable plastics. We believe that with technological progress, large-scale production, cost reduction, and environmental protection concept, there is more than 10 times more room for biodegradable plastics to grow in the future. PBAT is obtained by condensation of terephthalic acid, adipic acid, and butylene glycol. It is a new type of biodegradable plastic. Because it has both aliphatic and aromatic chain segments in its structure, it contains flexible fat chains and is suitable for film formation. PBAT has lower petroleum-based costs, less investment intensity, and more mature technical engineering. It is expected to become the largest category of degradable plastics in the future. The PBAT biodegradable plastic project with an annual output of 60,000 tons invested by the company has now completed project establishment and research reports, and is undergoing EIA and safety assessment procedures. It is expected to be put into operation in the second half of 2021. According to the company's research estimates, after delivery, the project is expected to increase annual revenue by 1,152 billion yuan, net profit of 1,07419,900 yuan, payback period of 4.29 years (including construction period of 1.5 years, after-tax indicators), and an internal rate of return on post-tax finance of 36.57%. 3. Profit forecasts and ratings assume a smooth start of production. We expect the company's net profit in 2020-2022 to be 81 million yuan, 133 million yuan, and 301 million yuan, respectively, corresponding to EPS of 0.35 yuan, 0.57 yuan, and 1.29 yuan, PE 25.7X, 15.6X, and 6.9X. Considering that the company is one of the leaders in the PVC additives industry, new production capacity is being launched one after another, and the PBAT biodegradable plastics project is also being deployed. It is expected that Ruifeng will be rebuilt, and it is expected that Ruifeng will be rebuilt, covering it for the first time, giving it a “buy” rating. Risk warning: Downstream demand falls, product prices fluctuate, and project commissioning progress is lower than expected