Haishun New Materials 2020 three-quarter report: The company's revenue for the first three quarters of 2020 was 494 million yuan, up 8.01% year on year; net profit attributable to shareholders of listed companies was 78.51 million yuan, up 51.04% year on year; increase of 51.18% after deduction. The company's revenue growth fluctuated slightly: in the third quarter, the company achieved revenue of 167 million yuan, an increase of 9.54% over the previous year, and the growth rate decreased slightly from Q2. In terms of downstream customers, the company binds major customers through consistency evaluation and related review systems, and enters the pharmaceutical packaging supply system for downstream customers for other products through long-term cooperative relationships. At the same time, it actively develops new customers to ensure the continuous expansion of the company's business scale. Second, the integration efficiency of the company's subsidiaries has improved, and the improvement in efficiency of related topics is expected to contribute to the company's overall performance. At the same time, as the company's major customers win the bid volume procurement policy list, the output of products won by downstream customers is expected to increase further, and the company is expected to continue to benefit. The company's profit sustainability was verified: Q3 achieved net profit of 31.37 million yuan, a year-on-year increase of 60.29%, and a year-on-year increase of 24.34% after deduction. The company's net profit margin reached 16.34% during the reporting period, up 4.94 pct from the same period last year, mainly due to the effects of increased company gross margin space and excellent cost control. The company's gross margin reached 33.5% in the first three quarters, an increase of 1.78 pct over the previous year. It mainly benefited from the continuous progress of the integration process of subsidiaries during the reporting period, and the increase in capacity utilization effectively drove the company's gross margin increase. In the first three quarters, the company's expense ratio reached 19.25%, down 2.13pct year on year. Among them, the management expense ratio was 7.44%, down 2.33pct year on year. Benefiting from the reduction in the company's equity incentive expenses and improvements in related controls at various subsidiaries, the sales, R&D, and financial expense ratios were 6.59%, 3.08%, and 2.14%, respectively, with changes of +0.28 pct, -0.7 pct, and 0.62 pct, respectively. The company's cash flow improved significantly: the company's operating cash flow in the third quarter was 67.27 million yuan, compared to -25.53 million yuan in the same period last year, mainly benefiting from continued growth in the company's revenue. In addition, the subsidiary Zhejiang Haishun withdrew a security deposit of 13.5 million yuan and reduced related cash payments. At the end of the reporting period, the company's accounts receivable reached 166 million yuan, a decrease of 06 billion yuan from the end of Q2, and the number of accounts receivable turnover reached 90.55 days, a year-on-year decrease of 54.95 days; at the end of Q3, company accounts payable reached 137 million yuan, a decrease of 15 million yuan compared to the end of Q2. The company received certain price concessions by paying in cash according to some purchases made during the reporting period, and the number of payable turnover days reached 134.55 days, an increase of 11.99 days over the previous year. A fixed increase in production capacity is planned, and the company is developing high-end and differentiated products: On October 9, the company announced a fixed increase plan for A-shares. It plans to raise no more than 601.6 million yuan (inclusive) for the construction of a high-barrier composite production line project with an annual output of 18,000 tons, which will be implemented by the company's wholly-owned subsidiary, Zhejiang Haishun. In this fixed increase project, cold-stamping high-barrier high-barrier bottles/syringes will be built in line with hard film production lines, recyclable high-barrier composites, multi-layer co-extruded high-performance bottles/syringes, etc. Among them, cold aluminum has always been the company's main product. It has excellent performance in blocking water vapor, oxygen, light, etc., and is widely used downstream. Multi-layer co-extruded high-performance bottles/syringes are expected to fill the gap in non-glass oral liquid and injection packaging in the domestic market. CU/CUP products have already been widely used in Europe, but production capacity is still in the process of being introduced in China and the US., which is expected to reduce domestic market products Prices drive the widespread application of products while seizing market opportunities to gain share. The total construction period of the project is 18 months, and it will proceed in an orderly manner according to the plan. Furthermore, the Nanxun base's medical, aesthetic, and food packaging production capacity is converted faster than the production capacity of pharmaceutical packaging materials. After gradually completing the climbing slope to achieve commissioning, it will effectively accelerate the increase in the company's capacity utilization rate and drive the overall efficiency to be optimized again. Investment advice: We expect the company's net profit attributable to shareholders of listed companies in 20-22 to be 115 million yuan, 164 million yuan, and 213 million yuan respectively, up 71%, 43.5%, and 29.7% respectively, maintaining the “buy-A” rating. Risk warning: The increase in concentration fell short of expectations, the profit status of the acquired company fell short of expectations, and the release of new Aclar Edge products fell short of expectations.