Main points of investment:

Production capacity rapid expansion of high thermal conductivity graphite film leader: the company's main products are high thermal conductivity graphite film, downstream for smartphones and other consumer electronics fields, entered the market in 2012, production capacity expanded rapidly from less than 800,000 square meters in 14 years to 3 million square meters in 16 years, with an average annual compound growth rate of more than 90%. Over the years, the production and marketing rate is more than 90% and shows a growth trend, and the market share of production and marketing is the leading industry. After raising investment and expanding production capacity of 2 million square meters, the total production capacity reached 5 million square meters, establishing a leading position, rapidly opening the gap with domestic competitors with less than one million capacity.

Core and screen drive the high growth of the industry, and the leader will win by scale: high thermal conductivity graphite film is close to chips and screens, high-level heat transfer characteristics and light and thin characteristics are highly matched with the cooling needs of lightweight consumer electronics such as smartphones. As the core market for downstream applications, we expect the market size of smart phones to exceed 10 million square meters by 2020, with a total scale of 1500 million square meters and a compound growth rate of 13%. The 10 million-level market of the Internet of things is expected to break out. With the advantages of capital, large-scale cost and good cooperation with downstream electronic enterprises, the industry leader quickly opens the gap with competitors and grabs a large number of market share; the breakthrough in the localization of upstream core raw material PI film is expected to quickly reduce costs and raise the level of industry gross profit margin.

Supply well-known brands at home and abroad, multi-level products to enhance corporate profitability: with good product performance and excellent service, the company has taken the lead in steadily supplying products to Samsung, Huawei, VIVO, OPPO, Meizu and other mobile phone brands. In recent years, revenue from well-known companies accounts for more than 80%. Brand companies' stable supply chain and 12-month certification period build barriers for the company. The proportion of revenue of high net value multilayer and composite thermal conductive film continues to increase, which helps the growth of the company's revenue and gross profit margin. Indoor thermal insulation materials and exhaust mobile phone materials lay a good foundation for the company's long-term development.

Profit forecast: with the improvement of the performance of smartphone products, the rise of new fields such as tablets and ultra-thin notebooks, the Internet of things, production and sales will continue to be strong, and the company is committed to becoming the world's leading consumer electronics cooling supplier. We estimate that the revenue of listed companies from 2017 to 2019 will be 5.12 shock 5.4 / 620 million yuan, and the net profit will be 89630.75 million yuan respectively, corresponding to EPS0.43/0.47/0.57 yuan. With reference to A-share comparable listed companies, it is suggested that the reasonable PE should be 35-40 times in 18 years. We will "cover" the company for the first time, taking into account the volatility of the new stock market and do not give rating for the time being.

Risk hint: the decline in product prices is higher than expected and the expansion of new products is not as expected.