Incident: The company announced its 2018 annual report, which included net profit of 35 million yuan, a year-on-year decrease of 26%, and net profit after deducting 56 million yuan, an increase of 73% over the previous year. The review is as follows: Deducted non-net profit surged 73%, and profitability further improved. The company announced that it achieved operating income of 1,393 billion yuan in 2018, a year-on-year decrease of 3.14%; realized net profit of 35.514,700 yuan, a year-on-year decrease of 26%, mainly accounting for the impact of bad debts, inventory price declines, goodwill, etc. of 12.82 million yuan, after deducting profit of 56.3768 million yuan, a year-on-year increase of 73.16%, mainly benefiting from a reduction in income tax. Looking at business, (1) copper foil: accounting for 33% of the company's revenue, up 37% year on year, mainly because the company grasped the demand for upstream copper foil from downstream 5G communications, new energy vehicles, automotive electronics, etc.; (2) copper clad board: accounting for 27% of the company's revenue, down 13% year on year, mainly due to delayed delivery of some products; (3) PCB: The PCB division successfully developed 5G high-frequency special boards and oversized special boards in 2018. Some have completed customer samples and achieved small-batch delivery. The company's gross profit margin of 16.88% increased by 1.55 percentage points year over year, indicating a further increase in profitability. Lay out high-precision lithium battery copper foil to accelerate domestic replacement and global leadership. According to CCFA and New Vision Studio, copper foil for PCBs is expected to reach 470,000 tons in 2020, and lithium battery copper foil is expected to reach 189,000 tons. However, since copper foil formulations, processes, and equipment are mainly in foreign hands, currently domestic 12um electrolytic copper foil is only mass-produced by Suzhou Futian, Anhui Tongguan Copper Foil, Lingbao Huaxin, and Chaohua Technology. The company already has the current mass production capacity of 6um lithium copper foil with an annual output of 8,000 tons. The high-precision electronic copper foil project (Phase II) with an annual output of 8,000 tons has entered the equipment installation stage. The total amount of energy will exceed 2 10,000 tons. In addition, lithium battery copper foil products have been tested and verified by some key customers, and shipments have been completed during the reporting period. Increase research and development of copper-clad panels with special substrates. High-frequency and high-speed transmission under 5G technology places higher demands on copper-clad plates of special materials. Traditional copper-clad plates are difficult to meet the requirements in terms of dielectric constants, loss factors, thermal expansion coefficient, etc. High-frequency high-speed panels bring a large amount of demand. The company continued to significantly increase R&D investment. In 2018, the R&D investment amount was about 67.83 million yuan, an increase of about 94% over the previous year, and the company collaborated with South China University of Technology and Harbin University of Science and Technology to develop “nano-paper-based high-frequency high-speed substrate technology” to bring certain technical reserves. It is intended to be a private offering to enhance competitiveness. In March 2019, the company launched a non-public offering to raise no more than 950 million yuan in capital for a PCB (including FPC) project with an annual output of 1.2 million square meters, a high-end core board project with an annual output of 6 million sheets, and supplementary working capital. The company's position in the industry and resilience to risks will be further enhanced. Profit forecast: We forecast the company's 2019/2020 revenue of 1,696/2,125 million yuan, respectively, and net profit of 116.175 million yuan, corresponding to PE 44/29. Overall, the company's focus is that the company's expansion of production of high-precision copper foil and high-frequency copper clad plates will benefit from domestic substitution and downstream demand and maintain an “gain” rating. Risk warning: downstream demand falls short of expectations: customer certifications such as copper-clad plates fall short of expectations; capacity expansion is slowing