Investment points: The company is one of the leading materials for electroplated diamond wire in China. The company's main business is the R&D, production and sales of diamond tools. The main products are electroplated diamond wire and diamond grinding wheels. As a new type of diamond material, electroplated diamond wire achieved small-scale sales in 2011 through years of research and development by the company, and was officially mass-produced in 2012. In June 2007, Japan's Asahi Diamond launched mature diamond wire products. With their first-mover advantage, Japanese manufacturers have always occupied a high market share. In recent years, domestic enterprises have launched domestic diamond wire products through independent research and development and technology introduction. Currently, there is basically no gap between domestic and foreign products, and market competitiveness is gradually being strengthened. In market segments such as sapphire cutting, silicon material formulation and truncation, and the monocrystalline silicon chip market, Japanese manufacturers have gradually been replaced by domestic manufacturers. In 2016, the company's diamond wire product revenue was 126 million yuan, which is a leading position in the domestic diamond wire field. PV installations have exceeded expectations, driving up demand for silicon wafers. The scale of rapid installation in 2017 exceeded expectations and the increase in the PV “13th Five-Year Plan” installation plan, driving up demand for midstream silicon wafers in the photovoltaic industry. In the global market, the cumulative PV installed capacity is expected to exceed 400GW in 2017-2020. At the same time, considering that the penetration rate of King Kong wire in the photovoltaic field increased from 32% in 2016 to more than 80% in 2020, the cumulative market capacity of the corresponding diamond wire in the photovoltaic field will exceed 60 million kilometers, and the corresponding market space will exceed 14 billion dollars. Diamond wire+black silicon technology is gradually maturing, and the field of polycrystalline silicon slicing is expected to quickly replace it. In the monocrystalline silicon wafer slicing market, diamond wire cutting technology has taken the absolute mainstream. Diamond wire cutting technology accounts for a relatively small share of the polycrystalline silicon wafer market, but it is rapidly improving. The main reason is that previously diamond wire cut polycrystalline silicon wafers were difficult to make at the battery end, causing the reflectivity of silicon wafers to be too high. However, with the rapid development of black silicon technology, the problem of excessive reflectivity of polycrystalline silicon wafers has been gradually solved. At the same time, after using diamond wire cutting technology, the production cost of polycrystalline silicon wafers will be further reduced. According to Solarzoom estimates, the direct cost will drop by 0.8 yuan/sheet, so in the future, diamond wire cutting technology will also achieve rapid replacement in the field of polycrystalline silicon wafers. The IPO was successfully completed, and production capacity was further expanded. On April 21, 2017, the company was successfully listed on the Shenzhen Stock Exchange's Venture Board. It issued 13 million new shares at a price of 14.99 yuan per share, raising capital of 195 million yuan. After deducting underwriting sponsorship fees, it raised 176 million yuan in capital. The company invested 125 million yuan to build a diamond wire saw project with an annual output of 1 million km. According to the company's 2017 semi-annual report, this project is expected to reach production in the third quarter of this year. The company's original diamond wire production capacity is 458,200 kilometers per year. After the new project reaches production, the total production capacity is expected to reach 1.45 million kilometers per year. Profit forecast and valuation: We believe that the company is the leading supplier of diamond wire materials in China, directly benefiting from the application of diamond wire in polycrystalline silicon cutting. We expect the company's net profit for 2017-2019 to be 0.74, 1.61, and 242 million yuan respectively, corresponding to EPS of 1.43, 3.09, and 4.66 yuan/share, respectively. The corresponding valuation of the current stock price is 39, 18, and 12 times, respectively. The valuation of similar companies in 2018 was 32 times. We gave the company a valuation of 26-30 times in 2018, which has room to rise 40%-65% compared to the current stock price. It covered for the first time, and gave it a “buy” rating. Increased risk: The company's production capacity expansion fell short of expectations; the penetration rate of diamond wire in polycrystalline silicon wafer cutting fell short of expectations.