Performance review The company achieved operating income of 2,237 million yuan in the first three quarters, down 38.53% year on year; net profit attributable to shareholders of listed companies was 266 million yuan, up 3.53% year on year, and EPS was 0.34 yuan. Business analysis Loader market share declined: In the first quarter of '12, demand for loaders declined; according to industry association statistics, the company sold a total of about 6,900 loaders during the quarter, down 42.15% year on year, and the market share was 13.56%, down 2.7 percentage points from 2011, showing that competition in the industry intensified against the backdrop of declining demand. Gross margin rebounded month-on-month: In the first quarter, the company's comprehensive gross margin was 15.58%, down 3.7 percentage points from the same period in '11, but up 3.5 percentage points from the fourth quarter of '11. This is mainly due to the reduction in the cost and price of raw materials such as steel and tires, as well as the increase in sales share of high-margin products such as excavators and long-wheelbase loaders. Sales expenses declined, but financial expenses increased rapidly: in the first quarter, the company generated a total of 285 million yuan in annual expenses, a growth rate of -26.27%, higher than the revenue growth rate. The rate of expenses for the period was 12.74%, an increase of 2 percentage points over the same period in 2011. Although sales revenue declined, the company's sales expenses decreased to 159 million yuan, a year-on-year decrease of 49.69%; however, due to the increase in borrowing, the company's financial expenses increased sharply by 3.5 times to 56 million yuan. At the end of the period, the company's short-term loans and long-term loans reached 2,780 million yuan and 400 million yuan respectively, an increase of 1,702 and 400 million yuan, respectively, over the same period in 2011. The increase in performance mainly comes from investment income contributions: the company originally held 48.15 million shares of Societe Generale Securities at a cost of 60.70 million yuan. After the company reduced its holdings by 9.35 million shares in '11, the company reduced its holdings again in the first quarter of '12, resulting in investment income of 263 million yuan for the quarter, accounting for 84.29% of total profit, or about 0.337 yuan for EPS. If the income from this investment is deducted, the company's net profit for the quarter should have dropped sharply year-on-year. Operating cash flow still needs to be improved, and the repayment pressure is still obvious: in the first quarter, the company's net cash flow from operating activities was 626 million yuan, an improvement over the net outflow of 812 million yuan in the same period in 2011. Mainly because the company's accounts receivable continued to increase, reaching 4,597 million yuan at the end of the period, an increase of 1310 million yuan over the beginning of the period. Considering that the company's monetary capital at the end of the period was only 574 million yuan, the repayment pressure is self-evident. Profit forecast and investment recommendations Due to the reduction in Societe Generale Securities stock holdings, we adjusted the company's profit forecast for 2012 to 2014. The estimated operating income was 11,354, 12,469, and 14,165 million yuan, respectively, and net profit was 660, 513, and 650 million yuan, respectively, up 49.24%, -22.25% and 26.65% year-on-year; EPS was 0.848, 0.658, and 0.833 yuan, respectively. The company's current stock price corresponds to 10.74 times PE in 2012, maintaining a “buy” rating. The risk indicates the risk of a sharp rise in raw material prices: steel accounts for a large share of the sales costs of the company's loaders and other products. If steel prices rise sharply, it will have a negative impact on the company's profitability. The investment income brought by the company's continued reduction in Societe Generale Securities shares exceeded expectations.