Performance Brief Review Lekai Film revealed 2017 semi-annual results: the company achieved operating income of 946 million yuan, +36.38% year over year; net profit to mother of 50 million yuan, +68.33% year over year. The company's business transformation was successful, and the interim results exceeded expectations. Sales of business analysis products reached a new high, and the performance continued to exceed expectations: the company achieved impressive growth of +36.38% in revenue and +68.33% in net profit to mother in 2017H1, mainly due to a sharp year-on-year increase in sales of various products. The company's business transformation achieved remarkable results. In the first half of the year, color photo paper achieved +19.33% year-on-year sales, and solar cell backpanels achieved +44.83% year-on-year sales, which strongly supported the company's performance. On the premise of ensuring the level of R&D expenses, the company managed all expenses properly. The gross profit margin was 17.78% and the net profit margin was 5.53% in the first half of the year, achieving a slight increase of +0.65ppt and 0.94ppt over the same period last year. With a comprehensive endogenous epitaxial layout, lithium battery diaphragms are about to be put into production: we predict that, benefiting from the demand for power batteries, China's demand for lithium battery separators will reach 3.8 billion square meters in 2020, and the market size will exceed 24 billion yuan. The company is the only platform for lithium battery separator business under the Lekai Group, and has obtained all of the Group's related technologies and patents. In order to achieve a comprehensive layout, the company plans to acquire Zhongke Technology, a leader in lithium battery separators, which will add production capacity of 220 million square meters of dry and wet production lines and 80 million square meters of coating lines. Currently, the company's own lithium battery separator business layout includes 3 projects with a total of 5 production lines. After completion, the total production capacity is expected to reach 57 million square meters, and the total profit before full production tax is 91.48 million yuan. During the reporting period, the company has successfully completed chemical tests on two lithium battery separator production lines. We expect normal production in the second half of the year, with a profit of 60 million yuan before full production tax. The company is an important platform for civil-military integration of the Aerospace Science and Technology Group, and will also benefit from the Hebei Aerospace Industry Group: the company is an important layout platform for new energy and new materials under the Aerospace Science and Technology Group, and has deepened cooperation with other research institutes under the Group in lithium battery separators and photovoltaic backpanels. Furthermore, the company is located in Baoding, Hebei, in the Beijing-Tianjin-Hebei collaborative development area, close to the Gu'an Aerospace Industrial Cluster, and will directly benefit from the radiation effects of the joint development of the Group's other industries in the future. According to the statement in Aerospace Science and Technology Group Document No. 1 of 2013, we judge that the company is expected to become the focus of the Group's military resource integration. Profit forecasting and investment advice The company divested the traditional film business in 2012 and gradually formed three major business layouts: imaging materials, photovoltaic materials, and lithium battery materials. It is an important new material development subsidiary under the Lekai Group. We believe that the company's lithium battery separator business layout is being strengthened and mass production is imminent. The photovoltaic materials business is rising with the industry, and the imaging materials business is becoming more and more stable, which will provide strong performance support for the company. Furthermore, the company is located in the hinterland of the Beijing-Tianjin-Tianjin Triangle, and is expected to directly benefit from Gu'an Aerospace Industrial Park's collaborative development strategy with Beijing-Tianjin-Hebei Province and become the focus of the Group's military resource integration. We are optimistic about the increase in profitability brought about by the company's business transformation and effective cost control, and raised the company's profit forecast. We are not considering the increase in performance brought to the company by Zhongke Technology. We expect the company's revenue in 2017-2019 to be 18.91/23.07/2,686 billion yuan, up 33.0%/22.0%/16.5% year on year; net profit to mother is 0.70/0.97/129 million yuan, up 69.7%/39.5%/32.6% year on year. We believe that the company's future performance growth expectations are clear, and at the same time, it is expected to benefit from the Aerospace Science and Technology Group's reform process and maintain the company's “buy” rating, with a target price of 20 yuan for 6-12 months. Risks suggest that the lithium battery separator project falls short of expectations; the risk of large accounts receivable; the growth rate of the photovoltaic industry falls short of expectations; the market size of traditional photosensitive materials and imaging materials has been drastically reduced; and the Aerospace Science and Technology Group reform process has fallen short of expectations.