The company's performance was slightly lower than expected.

In 2011, the company achieved operating income of 10.326 billion yuan, an increase of 6.96% over the same period last year; net profit of 390 million yuan, a sharp drop of 40.11% over the same period last year, and diluted earnings per share of 0.24 yuan; the annual profit distribution plan is to increase 5 shares for every 10 shares without paying cash dividends. The company's performance is slightly lower than we expected, and a large proportion of deliveries continue to exceed our expectations. The growth rate of the company's net profit is much lower than that of income, mainly due to the decline in gross profit margin, the rise in expense rates and the provision for large amounts of bad debts.

The competition is fierce and the gross profit margin has dropped.

Affected by the decline in the growth rate of investment in the iron and steel industry, the income from rolling and forging equipment decreased by 19.06%, the income from casting and forging by 12.33%, the income from lifting equipment by 2.128 billion yuan, up 9.13%, and the gross profit margin by 11.76%, down 0.3%. The income of excavators was 2.489 billion yuan, up 13.44%, and the gross profit margin was 19.39%, down 3.24% The income of train wheels and axles was 1.423 billion yuan, up 12.26%, and the gross profit margin was 11.43%, down 3.5%. The decline in gross profit margin of leading products is mainly due to fierce market competition, lower sales prices of products, and rising processing costs such as materials and labor.

Interest-paying debt increases and financial expenses increase rapidly.

During the period of last year, the expense rate was 8.52%, an increase of 1.6 percentage points over the same period last year, and the growth rate of the three expenses was higher than that of operating income. Among them, the sales expenses increased by 40.72%, mainly due to the rapid growth of transportation expenses, wages of distributors, bidding service fees and export business agency fees; management expenses increased by 25.15%, mainly due to an increase in new product development, staff salaries and office travel expenses; financial expenses totaled 108 million yuan, an increase of 32.96%. The company's interest-paying debt was 4.414 billion yuan at the end of last year, up 57.5% from the same period last year.

The speed of collection slows down and the loss of bad debts increases.

At the end of last year, the company's accounts receivable balance was 7.831 billion yuan, a year-on-year increase of 28.4%, which was much faster than the income growth rate. The accounts receivable turnover rate was 1.48 times per year, down from 1.77 times per year the year before. Due to the increase in the balance of collection, in the case of a relatively low proportion of provisions for bad debts, 106 million yuan was still set aside last year, a sharp increase of 55.8% over the same period last year.

Profit forecast and valuation

Last year, the order reached 14.431 billion yuan, of which complete sets of equipment, the first set of products and export orders made breakthroughs; the construction of the two major fund-raising projects and casting and forging projects made good progress, and the project under construction at the end of the period was 2.8 billion yuan, twice the current net fixed assets. It is estimated that from 2012 to 2014, EPS0.25, 0.28 and 0.33 yuan, the target price of 7 yuan, "overweight" rating.