Key investment points: A major trend in the popularity of King Kong wire is coming. Compared with traditional mortar cutting, diamond wire cutting has several major advantages: (1) diamond wire cutting speed can reach 2-3 times that of mortar, greatly improving slicing efficiency and single wire production capacity; (2) low blade loss and high sheet output rate; (3) thinning can reduce silicon wafer costs; (4) product quality improvement. Diamond wire cutting technology only began to gain significant development in China in 14-15. Leading single-crystal companies such as Longji Co., Ltd. and Zhonghuan Co., Ltd. have already popularized diamond wire cutting; polycrystalline silicon wafers were not yet popular until now due to factors such as the velvet making process. We believe that with the development of black silicon technology, diamond wire is expected to be promoted in the polycrystalline field. The compound growth rate of demand was over 60%. According to EnergyTrend statistics, the global monocrystalline market share in 15-16 was 18%/24%, respectively. We expect the share of monocrystalline diamond wire to reach 35%/50%/70% in 17-19; assuming that monocrystalline diamond wire is basically popular, the penetration rate of polycrystalline diamond wire is 10%, 30%, and 50%. It is estimated that the global demand for diamond wire for photovoltaics will be 142, 252, 33.4 billion meters per year; in addition, the total annual global demand for diamond wire is estimated to be 79, 150, 261, 34.5 billion meters, with a compound growth rate of 63%. The annual production of silicon wafers in China is about 63 GW, accounting for nearly 80% of global demand, so the demand for diamond wire will also be mainly concentrated in China. The best time to expand production has arrived to seize the leading position. According to our statistics, in 2016, the production capacity of mainstream diamond wire in China was about 5.8 billion meters, while the production capacity of electroplated diamond wire was about 3.4 billion meters; domestic production capacity cannot meet the rapid growth of demand, and there is room for import substitution. We believe that the next 1-2 years will be a golden period for the development of the King Kong wire industry, and 3-5 leading domestic companies are expected to emerge; the Sanchao New Material Fundraising Project is mainly a 1,000,000km diamond wire saw project, breaking through capacity bottlenecks, and room for growth has already opened up. It has excellent cost control capabilities, and customers cover major leading companies. As a domestic manufacturer of high-quality diamond wire, the manufacturing cost of 14-16 diamond wire was 198, 175, and 146 yuan/km respectively, and continued to decline. The gross margin of diamond wire remained at a high level of 41% in the first half of the year; the company's main customers covered major domestic photovoltaic manufacturers such as Zhonghuan Co., Ltd., Yijing Optoelectronics, GCL Group, and Longji Co., Ltd., which helped the company's product competitiveness to continue to improve. Profit forecasting and investment ratings. We expect the company's net profit in 2017-19 to be 5783, 8560, and 10,000 yuan, respectively, with year-on-year growth rates of 53%, 48%, and 46%, EPS of 1.11, 1.65, yuan respectively; we believe that in the next 3 years, demand will explode, supply-side import substitution, and the industry's gold development period will arrive; the company will expand production in a timely manner to enjoy the industry feast; with reference to comparable valuations in the same industry, considering factors such as the compound growth rate of the company's performance of 50% and sub-new shares, according to 40 times PE in 2018, corresponding to the target price yuan. Risk warning: Polycrystalline promotion is not expected; competition increases risk; price fluctuation risk; new product substitution risk.