The company is the largest leading enterprise in the domestic reflective materials industry with the widest range of products. On the basis of core technologies such as high-precision molding optical processing of reflective films, UV curing method coating, and micro-nano optical extrusion calendering, etc., it has continuously expanded to other functional films, and has successively expanded into fields such as microprism reflective film, aluminum-plastic film, brightening film, quantum dot film, PC/PMMA composite film, etc., and has become a leading functional film company in China. Reflective materials: The company has strong overall competitiveness, and the domestic replacement of microprism film and license plate process upgrading are the main highlights. Microprism films are mainly used in high-grade road traffic signs, with a domestic market size of about 2.5 to 3 billion yuan. The company is the only domestic enterprise with full intellectual property rights and mass production. In 2019, the company achieved sales revenue of 267 million yuan, an increase of 47% over the previous year, and maintained a gross margin of 60%. Currently, the company's domestic market share is only about 10%, and there is still plenty of room for domestic production to replace. New energy license plates use hot stamping technology. Compared with traditional license plate ink technology, it has obvious advantages, and it is expected to be promoted throughout the industry. In the context of industry upgrading, the company won bids for license plate films and semi-finished products in many places. In 2019, the company achieved sales revenue of 267 million yuan for vehicle protection and safety materials, an increase of 51% over the previous year, and gross margin increased to 53%. High-performance optical films: The performance of Warwick New Materials is expected to pick up as panel prices rise, and quantum dot films will bring additional volume. The company acquired Warwick New Materials and entered the field of brightening films. Brightening films are an important part of LCD backlight modules. Since 2017-Q2, TV panel prices have been in a downward cycle, and by the end of 2019, they had fallen below the production costs of some companies. As Japan and South Korea withdrew from low-generation production lines and the impact of the pandemic on demand weakened, panel prices rebounded again in late June 2020. We believe that the business situation of Warwick New Materials will also begin to improve in 2020Q2. In addition to brightening films, Warwick New Materials quantum dot films have been supplied in batches to TCL, achieving sales revenue of 10.39 million yuan in 2019, and is currently in the customer expansion stage. PC/PMMA composite sheet: Powering the 5G mobile phone backplane on the basis of self-sufficient raw materials. PC/MMMA film/sheet is an extension of the company's microprism film business. The PC/PMMA back cover has the advantages of glass-like appearance, high plasticity, high hardness, good scratch resistance, light weight, and low cost. It quickly replaces the metal back cover and is expected to become the mainstream choice for mid-range and low-end phones. We forecast the company's net profit for 2020/21/22 is 2.41/3.47/442 billion yuan, EPS of 0.39/0.56/0.71 yuan, corresponding to the current price of PE 23.6/16.3/12.9 times. Give the company 30 times PE in 2020, with a target price of 11.7 yuan. First coverage, giving a “buy” rating. Risk warning: import substitution, customer certification, new product launch progress falls short of expectations