Company Announcement: 1. It is proposed to purchase 50.00% equity of Xingrui Silicon Materials held by Yichang Xingfa and Jinfanda through the issuance of shares, and the issue price is 9.71 yuan/share; 2. At the same time, non-public issuance to raise matching funds Construction of organic silicon technology transformation and upgrading project, construction of 10 tons/year special silicone rubber and silicone oil project, repayment of bank loans of listed companies and replenishment of working capital of listed companies; 3. partial disposal of fixed assets, expected to be reduced to parent company by 2018 The net profit was 19,490,100 yuan.


Acquired minority shareholders' rights and interests of Xingrui Silicon Materials and improved the governance structure of listed companies. After the completion of the acquisition, the listed company will hold 100% equity of Xingrui Silicon Materials, Xingrui Silicon Materials will have 200,000 tons of organic silicon monomer, and the company will invest 688 million yuan to expand the capacity of organic silicon monomer to 360,000 tons. /year. The company's cost of producing silicones is obvious, mainly because methyl chloride, the main raw material for silicone production, is an important add-on to the glyphosate production process, and recycling will significantly reduce costs. Due to the decline in demand and exports, the price of DMC including tax has dropped from 34,000 yuan/ton to 19,000 yuan/ton since September 18, and the company is still making a small profit at the current price level.


Technical transformation and expansion of special silicone rubber and silicone oil projects downstream to further reduce costs and improve the industrial chain. The non-publicly issued share capital of this supporting financing shall not exceed 20% of the total share capital before the issuance (the company's current total share capital is 727 million shares), and the total amount of matching matching funds shall not exceed 100% of the transaction price of 50% equity of Xingrui Silicon Materials by way of issuing shares. . The technical transformation will help reduce the production cost of organic silicon monomer, and expand and improve the organic silicon industrial chain to the downstream. At present, the company has formed 30,000 tons/year 110 glue, 30,000 tons/year 107 through self-construction, mergers and acquisitions and investment attraction. The scale of silicone downstream products such as rubber, 30,000 tons/year sealant, 10,000 tons/year of compounded rubber, 10,000 tons/year of special silicone oil, and 0.8 million tons/year of white carbon black. The construction of the industrial chain has achieved initial results.


Earnings forecast and investment rating: The industrial structure of “mineral phosphorus-phosphorus-fertilizer” has gradually improved, and many businesses have worked hard to build a leading domestic phosphorous chemical, glyphosate and silicone industry. Taking into account the sharp drop in silicone prices in 4Q18 and the introduction of new capacity in the second half of 19 years, the company's fixed assets retirement treatment and the risk of goodwill impairment, we downgrade the company's earnings forecast, expecting net profit from 2018-2020 For 4.49, 5.05, and 606 million yuan (formerly 6.05, 7.62, 884 million yuan), EPS is 0.62, 0.69, and 0.83 yuan (formerly 0.83, 1.05, and 1.22 yuan), and the corresponding PE is 16X, 15X, and 12X. Maintain an overweight rating.