Investment highlights of the chemical new material industry: The industry prosperity is still at a high level. However, the sluggish downstream demand and continued tight capital situation have made the overall profitability of the industry face the risk of short-term decline. Meanwhile, we believe that during the "12th Five-Year Plan" period, the industrial structure adjustment and upgrading will mainly focus on two main lines - transformation and upgrading of traditional industries and fostering strategic emerging industries. This will make the chemical new material and fine chemical industries show better growth in the future. Therefore, we downgrade the investment rating of the basic chemical industry to "neutral", and maintain the "recommend" investment rating for the chemical new material and fine chemical industries. In October 2010, the State Council released the "Decision on Accelerating the Cultivation and Development of Strategic Emerging Industries", listing the new material industry as one of the key industries for development. This has brought about new historical opportunities and challenges for the new material industry. Under the strong support of national policies, some enterprises with financial strength and innovative spirit are increasing their R&D efforts. Some products' technology is gradually maturing and being localized, currently mainly focusing on functional polymer film materials, engineering and modified plastics, special fibers, and organic fluorine-silicon materials, ISO system certification. We particularly favor Kangde Xin (002450), Foshan Plastic Technology (000973), Jinfa Technology (600143), Tiansheng New Materials (300169), Riken Chemical (300214), Taihe New Material (002254), Yongtai Technology (002326) and Hongda New Material (002211). From the current development status of China's fine chemical industry, the traditional fine chemical field generally shows "excess quantity but insufficient quality". For the new fine chemical field, with the inherent requirements of industrial upgrading and consumption upgrading, service skills, its market space will grow rapidly in the future. Relevant companies in related fields will have better growth. Considering the progress of industry consolidation and the technical advantages of enterprises, we believe Xin'an Shares (600596), Zhejiang Longsheng (600352), Shanghai Jahwa (600315), and Lianhua Technology (002250) deserve more attention.