Event 2019 Annual Report: In 2019, the company achieved revenue of 2,735 billion yuan, an increase of 101% over the previous year; realized net profit of 167 million yuan, an increase of 36% over the previous year; achieved net profit of 153 million yuan after deduction, an increase of 36% over the previous year; and a weighted average ROE of 16%, an increase of 2.6 percentage points over the previous year. 2020 Quarterly Report: 2020Q1 achieved revenue of 620 million yuan, down 8.0% year on year, down 17% month on month; realized net profit of 69 million yuan, up 92% year on year and 77% month on month; achieved net profit after deduction of 69 million yuan, up 99% year on year and 125% month on month; achieved weighted average ROE of 6.20%, up 2.6 percentage points year on year. Profit distribution: 1.23 yuan for every 10 shares, with a total cash dividend of 50 million yuan. A brief review is a combination of internal and external factors. The performance of the company's annual report, which continues to grow at a high level, is basically in line with the performance report previously announced, with only a slight difference. The company's performance increased significantly over the same period last year, mainly due to: ① the significant expansion of the business scale after the merger of Haier's new materials; ② the company strengthened cost control, increased sales revenue, improved production efficiency, and the parent company's operating performance also increased. Judging from the report: ① The company's revenue scale expanded, and the gross margin level remained unchanged, and gross profit increased by 225 million yuan; ② the total cost, taxes and surcharges for the period increased by 143 million yuan; ③ various impairment losses and income decreased by a total of $28 million; ④ income tax increased by $05 million. The total increase in net profit from the above is 48 million yuan, which is basically in line with the actual increase of 44 million yuan. Looking at a single quarter, in the Q4 quarter, the company achieved revenue of 741 million yuan, up 32% year on year and 6.7% month on month; realized net profit of 40 million yuan, up 16% year on year, down 16% month on month; achieved net profit after deduction of 31 million yuan, down 3.3% year on year, down 36% month on month. In terms of cash flow, during the reporting period, the company achieved net cash flow from operating activities of 188 million yuan, a sharp increase of 517% over the previous year. The current net ratio and current income ratio reached 106% and 57% respectively. Projects under construction fell sharply by 79% year-on-year, mainly because the TPV expansion project transferred 25.7 million yuan to fixed assets in the current phase, and the 3,000-ton special hydrogenated nitrile rubber project transferred 84.28 million yuan to fixed assets in the current phase. In the face of declining revenue scale, 2020Q1's net profit and net profit after deduction of net profit from the net profit of the latter both increased sharply from month to month. Mainly due to the sharp increase in gross margin, the gross sales margin of the company in 2020Q1 was 22.6%, up 7.9 and 5.5 percentage points year-on-month, respectively. We believe it is related to the sharp rise in volume and price of melt-blown polypropylene for masks. Driven by the mask industry chain, demand for upstream meltblown polypropylene has increased dramatically. The company's product, polypropylene meltblown special materials, are raw materials for mask meltblown cloth. In 2018, the company's sales revenue for polypropylene meltblown materials was 183 million yuan, accounting for 18.83% of the parent company's operating income and 13.41% of the company's consolidated revenue. Since the outbreak of the epidemic, global demand for masks has increased dramatically, leading to a sharp increase in upstream melt-blown polypropylene demand. According to Xinhuanet, on February 22, China produced 54.77 million masks per day, including N95 920,000. On February 29, China's daily production of masks reached 116 million. Meanwhile, according to information from the Ministry of Industry and Information Technology, the daily production capacity of medical N95 masks in China exceeded 3.4 million on April 5. Assuming that the share of N95 masks in total mask production remains unchanged, then on April 5, China produced about 200 million masks per day. However, according to information from the Ministry of Industry and Information Technology, 1 ton of meltblown cloth can produce about 900-1 million surgical masks and 200,000 to 250,000 N95 masks. Assuming that the weight of meltblown cloth is the same as meltblown polypropylene, then according to this calculation, China's melt-blown polypropylene demand has reached 220 tons/day, with an annual demand of about 80,000 tons. Currently, the overseas epidemic continues to progress, and demand for masks is expected to remain strong in the short term. At the same time, TPV and IMSS are at the same time, the company expanding the automotive interior application market announced in January 2019 that it signed a cooperation agreement with Keteng. Keteng freely authorized Dawn Co., Ltd. to use a new thermoplastic elastomer production technology (IMSS) to inject flexible surfaces into automotive interiors. At the same time, Dawn Co., Ltd. procures from Keteng one of the polymer products required to produce this elastomer material (styrene elastomer). New thermoplastic elastomer technology (IMSS) for injection-molded flexible surfaces is an innovative solution for automotive interior skinning that is lightweight, environmentally friendly, and saves comprehensive costs. In the US, this technology has already been applied to Ford Fusion (US Mondeo) models. Currently, chlorine in vinyl chloride (PVC) blocking technology commonly used in China easily evaporates when the temperature rises, polluting the air inside the car. Today, when the mandatory national VOC standards for automobiles are becoming more stringent, it is gradually being replaced by TPV compression molding technology and IMSS technology. Compared with PVC, IMSS's injection molding capacity is increased by 5 times, which can effectively reduce the overall cost of production, and the product is more in line with the diverse styling requirements of automotive interiors, and has higher shock absorption, impact resistance, insulation, etc. As the leader of TPV in China, through this cooperation, the company can simultaneously occupy the two major technological highlands of TPV and IMSS, which is conducive to expanding the automotive interior application market, accelerating the replacement of PVC, and becoming a new performance growth point. High-tech technology leads TPV leaders and accelerates the deployment of thermoplastic elastomers TPV is a new type of polymer material that replaces traditional rubber, and is an important direction for the development of the rubber industry. The company is the first domestic enterprise in China to produce TPV using “complete pre-dispersion - dynamic full vulcanization” technology. The performance in all aspects is the same as that of high-end TPV imported from abroad; 60% of the TPV downstream use, 90% of the company's TPV products are for vehicles, which is significantly higher than the industry average. The company previously had a production capacity of 22,000 tons, and the 11,000-ton expansion project has been strengthened; at the same time, the company is actively exploring new fields, including automotive interior coating materials, new elastomer ADV materials for new energy vehicle water pipes, foaming agent TPV, and new tire gas barrier materials, etc., expanding production capacity At the same time, potential markets are expanded. In addition to TPV, the company's 10,000-ton TPU project was put into operation in 2018, the first phase of the 3,000-ton HNBR project of 1,000 tons has already been put into operation, and the 3,000-ton TPIIR project has been postponed until June 2021. HNBR targets import substitution in the high-end sector. As a high-margin product, the gradual expansion of HNBR will bring rich profits to the company. In terms of TPIIR, the company is the second company after ExxonMobil that can produce TPIIR and has independent intellectual property rights. It is mainly used to replace TSIIR in the medical rubber plug industry. After the TPIIR project is completed and put into operation, it will have a large customer base. In the future, the company will be deeply involved in the three major elastomer platforms (vulcanization platform, esterification platform, and hydrogenation platform) and adopt industry-university-research modular development to accelerate the process of new technology research and development-industrialization-commercialization; modified plastics will grow rapidly through epitaxial means, making the company a green composite material company with technology, characteristics, and competitiveness. The merger and acquisition of Haier New Materials to expand the level of business development In November 2018, the company announced that it would purchase 80% of Haier New Materials held by Yantai Xulisheng in cash. After the transaction was completed, the company directly held 80% of Haier New Materials, and Haier New Materials became a holding subsidiary of the company. On the one hand, Haier New Materials promised a total non-net profit of RMB 185 million in 2018-2020, and the company's 2016, 2017, and 2018H1 net profit was 2,478, 4,752, and 3053 million yuan respectively. Profits grew steadily, which will be a major support for the company's performance in the future; on the other hand, Haier New Materials is mainly engaged in the production and sale of modified plastics such as PP and ABS, which is an important complement to the company's business; at the same time, the company's product advantages and sales through Haier New Materials Channels can further enhance partnerships with downstream customers, expand product markets, and enhance the continuous profitability and overall competitiveness of listed companies. In June 2019, the company announced a convertible bond plan and plans to raise no more than 360 million yuan to build a 120,000-ton polymer materials project. The implementation of the project in Haier New Materials will further expand Haier New Materials production capacity and break through production capacity bottlenecks. It is estimated that the company's net profit in 2020 and 2021 will be 280 million yuan and 360 million yuan respectively, corresponding to 63 and 49 times PE, maintaining an increase in holdings rating. Risk warning: production safety risk, macroeconomic fluctuation risk, technology substitution risk, capacity release and digestion risk.