We held a conference call with the company's investor relations manager. Conference call minutes: The recent COVID-19 pandemic in Ningbo had little impact on the company's operations. New orders placed in 2022 are expected to remain at a normal level. Given the high price of steel, the pressure on gross margin is likely to continue. The effects of electricity restrictions have largely ceased since November. Domestic and overseas production capacity expansion is progressing in an orderly manner. Overseas production capacity will increase further in the future. The next generation of products will be launched by 2025. A self-used solar power project is being tested and may be promoted in 2022.

We lowered our earnings per share forecast for 2021/2022/2023 by 18.8%/34.1%/30.9%, respectively. We mainly lowered our sales assumptions based on a slowdown in new orders in the second half of 2021 and a more bleak order outlook for 2022, and 2) lowered our gross margin assumption based on stronger cost pressure than expected.

The target price was lowered to HK$24.10 and “collection” was maintained. Our target price based on DCF corresponds to a price-earnings ratio of 11.8 times/12.8 times/11.4 times the 2021-2023 price-earnings ratio and 2.0 times the 2021 net price-earnings ratio. Despite the recent correction in order volume and pressure on gross margins, we think most of these negative factors have been reflected in stock prices and the current valuation is attractive to us. We expect the company's expanding overseas production capacity to boost its overseas sales over the long term and partially offset the declining trend in the domestic market.